I have never believed that the White House occupant mattered much when it came to the economy in the short term. An administration’s long-term policies can influence how well America does economically to a certain degree, but stock market gyrations, trade imbalances, and even inflation are the result of global trends.
There is no better example of this than the price of gasoline. In Britain if the higher gas taxes are factored in, the cost of a gallon rose by almost the same amount as in the U.S. While Biden and the Democrats may try to say it is Putin and Republicans want to lay the blame at the feet of Biden, the real reason is global demand has risen due to the acceleration of the economy in both countries.
Inflation is a global phenomenon with Britain’s inflation rate increasing by 6.2% and the E.U. by 5.8% in the past year. America at 7.9% is higher but that is because our economy has rebounded faster than Europe. The U.S. is experiencing rapid economic expansion with consumers on an extended buying spree.
The Fed has recognized this over-heating and has begun to raise interest rates. The question will be whether they can do so without bringing on a recession. One thing is certain…there does not need to be any more stimulus spending.
Europe needs to wean itself off Russian energy. That will mean that the U.S. and Europe must continue to have a hard line toward Russian imports. Even when the current Ukrainian war is over, America and Europe must build the infrastructure needed to import oil and gas from non-Russian sources. Both must continue with alternate energy manufactured domestically that cannot be held hostage to political turmoil. In the interim by not buying Russian energy this will raise the cost of gas and oil for all of us.
We are undergoing a worldwide re-alignment of how world economies work. Globalization may become more targeted. Not only have our supply lines been subject to upheaval because of COVID but also the price of shipping and the congestion in ports may have made it cheaper to manufacture certain things closer to home.
For America, we need to take advantage of our Canadian and Mexican neighbors, The USMCA, the successor to NAFTA, should become even more valuable and be more integrated into our economies. While I am not suggesting that we integrate politically with our neighbors, I do believe a stronger economic alliance would benefit all. Central America should be brought into the trade alliance. If you want to reduce immigration from that area, then intertwining democracy and strengthening Central American economies would be beneficial to all of us.
Inflation may become worse before it gets better because of the Russian/Ukrainian War. Grain prices will explode in the coming year since nearly 30% of the world’s wheat is grown in Ukraine and Russia. Because of this the inflation rate will increase both here and in Europe by about the same amount.
It is important that we separate the politics from the economics. Conflating the two is not in any one’s interest. Both Democrats and Republicans should not try to turn this into a “gotcha” moment. Given the current set of circumstances, it wouldn’t matter who was sitting in the White House. Inflation and gas prices would be the same.