Taming inflation is the greatest economic challenge facing the US, Alex Williams (@vebaccount) writes.
Many people, including President @JoeBiden, are looking to the Federal Reserve to solve the problem. 👇
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The problem is, Williams says, the Fed has one tool to slow rising prices: interest-rate hikes.
But this strategy for slowing down price increases makes Americans even poorer.
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Thankfully, there is another way. There are a few notable places where White House and Congress can step in to help slow inflation without crushing average Americans.
Policymakers can follow a three-point plan to tackle inflation, Williams writes.
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Following this plan would allow Biden and lawmakers on Capitol Hill to slow inflation without cutting into much-needed new investment or throwing people out of work, Williams says.
These strategies would counter inflation at its root.
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Much of today’s inflation comes from an acute shortage of physical capacity in capital-intensive sectors.
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But while these issues are coming to a head now, the physical limitations of our supply chains are the result of decades of cost cutting and downsizing by companies in response to weak demand after the financial crisis.
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To build back this capacity, the US government should make direct investments to increase physical production capacity and encourage businesses to follow up with their own.
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This would help stabilize prices in the near term while strengthening the economy in coming years, Williams says.
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Another important segment of the US economy dealing with capacity issues is the housing market.
Over 1.6 million housing units are still mired in construction backlogs — the highest number of in-progress units in decades.
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Congress and the administration should explore mechanisms for directly funding and addressing the additional costs associated with the backlogs in residential construction, particularly where single-material inputs remain in short supply.
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The Bipartisan Innovation Act would also, helpfully, reduce costs for firms already investing aggressively to ease arguably the most impactful "core inflation" bottleneck: semiconductors.
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To read more from @vebaccount on how Biden can help stop inflation, subscribe to @thisisinsider.
For more stories like this one — plus career insights, market analyses, trend breakdowns, and more — become an Insider today. 👇
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