The supply and demand curve tells us that sellers/sellers want to get the highest price for their product, while the buyer wants to pay the lowest price.
If the buyer really needs the product, especially if it is essential (like gas), he will pay a higher price. In such cases, the seller/retailer can make good use of or take advantage of the buying opportunity. We see this with the pharmaceutical industry and, I would say, the oil industry, and many other retailers in times of rising prices.
Yes, folks, sellers are squeezing their profits at the expense of many of us consumers. For example, in August 2022, Exxon posted a profit of $17.9 billion – the largest quarterly profit reported by any oil company in history. Chevron reported $11.6 billion, Shell reported $11.47 billion, and BP reported $8.45 billion. energycommerce.house.gov/newsroom/press-releases/
Now to politics. Recently, I heard on the news that the federal government is increasing Social Security benefits and reducing taxes by changing tax rates. Meanwhile, the Federal Reserve has raised interest rates, while several states are also reducing gas taxes and taxes.
Michael Rappeport of the New York Times said, “But while the policies are helping Americans deal with the fastest inflation in 40 years, economists warn that, ironically, the tax cuts could increase a problem that lawmakers want to address. By putting more money in people’s pockets, policymakers risk increasing the number of consumers, driving up prices across the country.
The real issue is that policymakers are more concerned with short-term politics than with long-term economics. Yes, there are political considerations behind economic policies.
Jason Furman, an economist at Harvard, said, “I think that federal tax cuts are increasing inflation.” “The problem was that there was a lot of state and local money.”
In order to provide a proper analysis of tax and interest rate reduction, it is important to understand that there are two types of policies – increase, so that the economy grows, and reduce the reduction of the economy, and reduce the deficit.
A tax cut is an example of an expansionary policy, because it puts more money in the hands of the people, spends it, and increases demand. Even if they choose to save, businesses now have access to more capital to borrow and spend. The more money you spend, the higher the price will rise (inflation). That is the problem we have now.
As COVID ravaged the country, the economy began to decline or decline. To this end, the federal government stimulated the economy through various expansionary measures. Billions in stimulus money went to states, municipalities and individuals. Of course, the federal government was very generous. Now countries have a lot of money, they don’t know what to do with it, and they are exacerbating the situation by trying to reduce inflation for residents by giving them tax credits, which only puts more money in the hands of residents. Again, folks, more money in people’s hands means more spending and higher prices, as consumers are lured by sellers/vendors who want to give them a bigger discount. So what policies are not contributing to inflation?
- Tax reductions by governments and governments.
- Student loan forgiveness, which leaves borrowers with more money to spend.
- An increase in Social Security benefits.
Again, expansionary policies only increase inflation. Contradictory policies, such as the Fed’s interest rate hikes are supposed to make money harder to find, leading to lower spending, and therefore higher prices.
The problem is, the austerity program causes the economy to do just that, cooperation, which is limited. So, while I’m not in favor of raising interest rates, I’m also not in favor of higher rates. The policies of the Fed, the federal government and the states, which are contradictory, will not help to reduce inflation and may lead to economic collapse. More money in your hands may be good for you, but not for inflation.
Kojo Quartey is the president of Monroe County Community College and an economist. He can be reached at [email protected].
