It’s been a long time since we faced the monster of inflation.
The last time we had this type of terrible inflation, the Federal Reserve embarked on a chemotherapy approach to solving the problem. Then-Federal Reserve Chairman Paul Volcker believed that to save the economy, he had to kill it. He believed that only by dramatically increasing interest rates above the inflation rate would the Federal Reserve be able to slay the inflation dragon. In the process, the economy went into a severe recession, the unemployment rate skyrocketed, businesses closed, trade shriveled up and the nation suffered.
I don’t think we necessarily need to take the chemotherapy approach to whipping inflation now, as former President Ford might have put it. I think Republicans can offer specific free-market approaches that use the laws of supply and demand to bring down prices and counter the misguided policies offered by the Biden administration.
For example, we can embrace again an all-of-the-above energy strategy that aggressively allows the exploration and production of petroleum and natural gas throughout the United States. The Biden administration, bowing to the demands of the wealthy environmental movement, has choked off production throughout the United States while making it more difficult for gas to come in through pipelines from Canada. Reversing those inflationary policies should and will be a top objective of Republicans if they retake Congress.
Republicans should aggressively increase the labor supply, which is another reason why prices are skyrocketing. There are two approaches to getting more workers into the workplace. One is to dramatically scale back welfare benefits that make it easy for people not to work. The second is to import more workers through expanded visa programs. I would prefer the first approach, but I am open to the second one. We need more workers. Businesses can’t survive without them.
Republicans should also embrace an anti-trust, pro-small business approach that brings more competition into the marketplace. Having two or three meat-packing companies corner the market leads to inflated prices. Breaking the Big Tech monopolies is a good long-term strategy to make our economy vibrant. And more competition leads to lower prices.
Republicans should counter the Biden regulatory state. Ridiculous regulations lead to higher prices. The higher the regulatory burden, the higher the barrier to entry for smaller firms. The Biden regime is regulation-happy. Republicans need to make small business happy by finding a way to ease the Biden regulation burden.
The housing crisis is a direct result of supply and demand interruptions, made worse by liberal NIMBY (“not in my back yard”) activists. Republicans need to find ways to counter these hypocrites and make it easier for builders to build more homes more quickly. The only thing that will help ease housing prices is more houses.
Inflation is caused by too many dollars chasing too few products or services. Stopping the federal government’s spending spree is certainly one way to slow down inflation, but Republicans should be smart about how they cut spending. It makes sense to stop spending on useless government regulations and wasteful government bureaucracies, but it doesn’t make sense to raise taxes on productive businesses that create more products that consumers enjoy. So, a top way to fight inflation is to keep the Trump tax cuts in place, especially the corporate rate but also the tax cuts targeted to middle-class consumers.
Finally, Republicans need to take a mature approach to trade. Robust trading relationships, even with China, have been a key way that prices have been held in check for more than two decades. If we decide to on-shore every product enjoyed by consumers, prices are going to increase. That’s just the reality, and we need to be honest with voters about the trade-off.
The Biden administration has done nothing to further a coherent trade policy. Republicans should embrace both free and fair trade, acknowledging that cheaper supply chains start with trading partners that have cheaper workers. In that context, we should reevaluate the efficacy of tariffs that the Biden administration has seemingly embraced after being imposed by former President Trump.
The free market and the laws of supply and demand can whip inflation, maybe not now, but in the short term, and they can do so without the pain of higher interest rates.
Feehery is a partner at EFB Advocacy and blogs at www.thefeeherytheory.com. He served as spokesman to former House Speaker Dennis Hastert (R-Ill.), as communications director to former House Majority Whip Tom DeLay (R-Texas) and as a speechwriter to former House Minority Leader Bob Michel (R-Ill.).