New York, USA (CNN)– Among the many ridiculous and bad discussions taking place on Twitter, the president of the United States and the world’s second-richest person is being circulated about dullness and deliberate simplification.
If you’ve been away from Twitter lately, first of all: that’s good for you, here’s a quick summary of the dispute between Jeff Bezos and President Joe Biden.
Biden tweeted Friday that the way to bring down inflation is to “make sure the wealthier companies pay their fair share.”
But Bezos, founder of Amazon, a wealthy company, objected. He responded that linking corporate taxes to inflation was “just a misdirection”.
In short, Bezos believes that the federal stimulus payments caused inflation, and Biden says corporate greed is the culprit. Both are right, and they both exaggerate their positions.
The truth is that inflation has no single cause. Did nearly $2 trillion in stimulus for households and individuals increase demand for goods and help inflation hit a 40-year high? Yeah.
The CPI was below 2% in Biden’s first month in office. Stimulus checks began arriving in bank accounts in March 2021, when the annual inflation rate rose to 2.6%, hit 4.2% in April, then 5% in May, 6% in October, and is now over 8%.
That’s one point for Team Bezos. (Though worth noting is the drop in the unemployment rate from 6.2% when Biden took office to 3.6% now, all of which point to a recovery in the economy.)
But did companies like Amazon enjoy record profits last year and still raise prices on consumers to protect their profit margins? definitely.
What neither Biden nor Bezos mentioned in their tweets are the myriad other factors responsible for high global inflation. Factors such as supply chain bottlenecks and shortages that remain due to the unprecedented global shutdown of the economy in two years.
Also worth noting is the Federal Reserve’s unprecedented intervention in financial markets that began in the spring of 2020. When the pandemic hit the United States, the Fed unleashed a flood of money while cutting interest rates to near zero to prevent an economic meltdown. This policy enacted under the Trump administration by Trump-appointed Federal Reserve Chairman Jerome Powell has kept stock markets going through 2021, as Bezos sure knows. Big with other technology stocks in recent months.
There is also a land war in Eastern Europe that is upending global markets and causing food and energy prices to soar. Millions of people are subject to strict lockdowns in China, slashing consumer demand and halting manufacturing in the world’s second largest economy. Moreover, there remains a complex unresolved psychological imbalance in the labor market forcing companies to increase spending on wages and other benefits.
Although Biden and Bezos hint that inflation can be settled if companies stop being greedy or the federal government stops spending a lot of money, there is no easy fix.