Opinion: Biggest causes of inflation are international; but even Asheville does its part

Asheville’s growing economy always has inflation, but there are different kinds. Today’s kind is not the quantity of money being spent for the city’s resources, products and services. It’s how much money is being spent by financially comfortable citizens compared to the struggling middle class and poor.

Our national government’s tax, fiscal, labor, business and foreign policies must solve today’s inflation problem. The Federal Reserve will only make it worse.

The Fed’s job is to ensure a safe, flexible, and stable monetary and financial system. It tries to make sure that there is enough money for a growing economy, yet not so much that there is an unhealthy level of inflation.

But today, when it raises the prime interest rate for all our nation’s cities, it makes conditions worse for those who are already suffering most. Businesses contract, jobs are lost, workers’ income raises are less, and their standard of living declines.

Asheville’s millionaires — and even high-middle-income persons — are proliferating, getting wealthier and buying whatever they desire. On the other hand, those who lost jobs and incomes during the pandemic find that they can no longer afford to pay the increasing costs of things they must have, like housing, medicine, and even food.

The illustrative case is the Asheville housing market. The rich get wealthier when they pay cash to buy houses. The housing supply dwindles, demand increases, and the costs of buying or renting go up for everyone.

The historical record should have taught us that the Fed should not reduce the kind of inflation we have today, for the following reasons.

First, today’s biggest causes of inflation are international, and there is little our government can do about it by itself. Climate change, the Ukraine war, the pandemic, and supply chain failures have raised costs in all countries. The only way government can reduce international costs is to negotiate with other countries to find mutually beneficial solutions.

Former President Donald Trump made international inflation worse when he threatened to withdraw the United States from NATO, alienated our allies, and cozied up to the leaders of Russia, North Korea, Saudi Arabia, and other dictatorial countries who have no interest in helping the U.S. economically. Thankfully, President Biden vastly improved our relationships with other democracies, and international inflation isn’t nearly as bad for the U.S. as it is for most other countries.

Second, the most important national cause of inflation is when government cuts taxes on corporations and the wealthy. They then have more money to buy our nation’s resources, products and services. To the contrary, raising progressive taxes on them reduces it, like it did between 1933 and 1980 when our nation created the greatest middle class in history. We had the highest progressive taxes on corporations, incomes and inheritances. We even had an excess corporate profits tax during WWII.

Donald Trump’s 2017 Tax Cuts and Jobs Act had an especially bad inflationary effect during a pandemic. It increased the purchasing power of corporations and the rich by giving them huge tax cuts. It gave only small pacifier tax cuts for upper income workers. Those whose incomes weren’t high enough to pay taxes got no benefits. Those on the lower end of Asheville’s economic scale were, and still are, the ones most devastated by inflation.

Third, when the Fed raises the interest rates it doesn’t reduce the spending of billionaires and millionaires. They don’t have to borrow the money they need to buy whatever they want. They already pay cash for houses to rent to those who are struggling to make ends meet.

Fourth, when the Fed increases the prime interest rate, it hurts Dallas’ small businesses, workers, the middle class and poor. They are the ones who need to have more money to buy what they must have to survive, let alone thrive.

In summary, President Joe Biden’s prescription for improving the economy and reducing inflation is what our cities need. Improve relationships with our allies, raise taxes on corporations and the wealthy, and finance programs that will solve our supply chain problems throughout the U.S.

The Fed’s sledgehammer attack on the world’s best democratic economy is no solution.

Fairview’s Chuck Kelly is author of "The Destructive Achiever; power and ethics in the American corporation and Why Capitalism Thrives—and how it Self-Destructs." Email: kellycm2@bellsouth.net

This article originally appeared on Asheville Citizen Times: Biggest causes of inflation are international; Asheville does its part