The Fed’s Inflation Is behind the Supply Chain Mess
It seems supporters of the Biden administration finally settled on a narrative they like for explaining away supply chain shortages.
Here’s the administration’s talking point: the US economy is rolling along so well that Americans are demanding huge amounts of goods. That’s overwhelming the supply chain and causing the backups roiling America’s ports and logistic infrastructure.
For example, transportation secretary Buttigieg this month declared “Demand is up … because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”
Similarly, White House spokeswoman Jen Psaki told reporters supply chain problems are occurring because “people have more money … their wages are up … we’ve seen an economic recovery that is underway.”
This position has been mocked by a number of conservative politicians—including Senator Ted Cruz—and commentators, who find this to be an absurd assumption. Indeed, Cruz and other critics could point to a variety of factors ranging from the weight of government regulations to the problem of covid lockdowns limiting the productivity of supply-chain workers.
Yet the administrator’s defenders are right about consumer demand and spending—even if for the wrong reasons. As Mihai Macovei showed earlier this month, the global volume of trade and shipping volume in 2021 have actually exceeded prepandemic numbers. For example, in the port of Los Angeles, “loaded imports” and “total imports” for the 2020–21 fiscal year (ending June 30, 2021) were both up when compared to the same period of the 2018–19 fiscal year.
In other words, it’s not as if little is moving through these ports. In fact, more is moving through them than ever before. That suggests demand is indeed higher.
But why is it higher? It some ways, it’s true that, as Psaki says, “people have more money.” That, however, is where the veracity and usefulness of Biden’s defenders end in explaining the problem.
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