International goods and workers bring great joy to the economy

Lael Brainard, director of President Biden’s National Economic Council, recently brought some good news for the U.S. economy and something to think about.

The latest data reflects the Federal Reserve’s efforts to reduce GDP growth, employment and inflation — all in an effort to avoid a 2023 recession — Brainard said. said „The width of the runway for a soft landing has become too large.” He indicated with optimism that the economy would „retain strength next year”.

Brainard, who until recently was the Fed’s vice chairman, praised the work done by Chairman Jerome Powell and offered important insight to consider. One factor that gets more curses than praise in Washington is that immigration has „helped the American labor force rebound.”

By turning the analytical focus to a change on the supply side of the economy—behind-the-scenes producers of goods instead of plain-sight consumption—Brainard reminded us that a recession is not necessary to reduce inflation. In fact, if we could tap into the world’s labor supply and bring in more goods, the increase in supply could actually counteract Washington’s covid-loving printing of money and the spiral of inflation it started.

We should note that Brainard says that there are many dangers to be faced and much work to be done. Although the White House has not agreed to print and deposit President Biden’s 2020 decision, it is certainly true. Over $1 trillion This led to a spending rush in America’s bank accounts, which caused the Consumer Price Index, a measure of inflation, to rise above inflation. 9 percent About 18 months later.

Unfortunately, printing new money does not suddenly result in more new cars and trucks at dealerships, more beef or turkey in our supermarkets, more paint or home improvement products in our hardware stores, or more health care providers in our hospitals. With more money in circulation, prices skyrocketed.

But incentives matter and, as Brainard reminds us, something good happened on the supply side. In 2021The number of foreign-born, 25-year-old U.S. wage earners increased by 6 percent, followed by a 10 percent increase in 2022. There was nothing like that in the previous 15 years.

To add more to the supply side story, there was a Big increase In goods and services imported from other countries. In 2021, measured year-over-year in constant dollars, it increased by 14.4 percent; 8.6 percent increase in 2022.

In other words, we had more workers and more goods coming to our shores. Supply has increased, giving consumers more choices and better-stocked shelves, driving some prices down and cooling the flames of inflation a little more than the Fed’s efforts.

As has often been said before, the more expensive the medicine … the more expensive it is. These can be preludes to plenty. Like a home furnace thermostat on a warm morning, when the indoor temperature hits the trigger point, great things follow. Businesses and workers, at home or abroad, are relieved to see potential profits from more goods or more labor.

But despite how a self-regulating market economy is supposed to work, not everyone likes what’s going on. This is where politics, protectionism and government intervention enter our story. After all, foreign-born workers looking for work are sometimes mistakenly seen as competition for domestic workers. More imported goods are competition for domestically produced goods that seek to find a home and alleviate shortages that drive up prices.

Yet it is competition that brings lower costs, lower inflation and, in the long run, greater prosperity for Americans. Long-term thinking can be a challenge for politicians who need to survive in the short term. That’s why it’s important for all of us to remember the lesson in Lael Brainard’s gospel.

In Bruce Year He is a Distinguished Adjunct Fellow at the Mercados Center at George Mason University and Dean Emeritus of the College of Business and Behavioral Sciences at Clemson University.