In a World Divided, We Need a Nation United
- March 22, 2023
COVID continues to be our national nuisance, but there is a monster of a menace that is more harmful in the long run than this pesky pandemic. It’s like that ticking bomb that appears in so many dramatic television programs or Hollywood films where the hero is trying to figure out how to defuse this
COVID continues to be our national nuisance, but there is a monster of a menace that is more harmful in the long run than this pesky pandemic. It’s like that ticking bomb that appears in so many dramatic television programs or Hollywood films where the hero is trying to figure out how to defuse this thing before it blows up and takes out a city block. Its name is Inflation — and it is ticking away as we speak.
Few of those under the age of 50 have personally experienced how difficult it was to live with an economy that was racked by inflation. Let me give my personal example. I bought my first home in 1977 in Norristown, PA, and I was able to get a special VA mortgage rate — 15 percent! The standard rate at the time was 16.5 percent. I knew folks who had mortgage rates over 20 percent. These ridiculously high mortgage rates ate up a huge hunk of a family’s disposable income, and worse, there was virtually no equity being gained by homeownership in those first few years of the mortgage. Adding to the pain were high gas prices that increased four times over in the 1970s. Everything was expensive, and shortages were typical. What made it even more frustrating was watching any pay increases getting sucked up by the rising cost of everyday living.
However, the high-interest rates were nice for those who had money to invest. They were cleaning up. Check out the 1987 film, “Wall Street,” starring Michael Douglas and Charlie Sheen, to get an idea of the euphoria that investors had in the Bull Market during that time. Those in positions of political influence (who also coincidentally were rather wealthy) found rampant inflation, not such a bad thing to have around.
But the normal, everyday working Joe desperately wanted this to change, and this — more than anything else — was the message that brought Ronald Reagan into the White House in the 1980s. The experts scoffed at his economic policies, but it brought the double-digit inflation under control, and once this happened, it stayed under control. Even the stock market bubble pop in 1986 and the banking crisis of 2007-2008 had little impact on the inflation rate. From the year 2000 to January 2021, the average inflation rate in America has been 2.14 percent annually, with the highest being 3.99 in 2006.
The reason for this stability these past decades has been because (astounding!) Washington elected officials and bureaucrats understood one of the most basic, fundamental concepts of economics — supply and demand must be relatively equal. If supply is higher than needed, production and services suffer as suppliers will take losses and be forced to cut back, which hurts the economy. The opposite is what we are experiencing now, demand is higher than supply, and thus things cost more. (Example: The reason why a bottle of water can cost as much as $3 at a ballgame is that you are thirsty, and the ballpark forbids you to bring in your own water. High demand plus limited supply equals a highly price-gouged bottle of water.)
With the federal government pouring trillions of dollars into the economy alongside the problem with the delivery of goods, inflation has amped up considerably. As of October of this year, the inflation rate is 6.22 percent, and some experts are predicting an 8 percent by year’s end. Do not read over that quickly. Inflation is already three times higher than it has been in three decades, and it will probably get higher. A recent Gallup poll reports that 45 percent of Americans say recent price increases have caused their families financial difficulty; 35 percent call the pain “moderate” while 10 percent find it “severe.”
To make matters worse, this does not just impact us personally. Our local government entities will be faced with the fact that the 2022 budgets they have approved in 2021 might turn out to be insufficient as the year progresses because the cost of the goods and services will cost more than budgeted. This will require digging into reserves (if they exist) or borrowing money to keep those government services functioning. These costs will roll over to the next year’s budget, and if high inflation rates continue, the whole process will be deja vu all over again.
So, residents of Lycoming County, be aware that county government and all the local government entities are going to be doing a tap dance through next year. The “free” money that has poured into the county and local municipalities through these various programs related to COVID relief will be like cotton candy. It tastes sweet and brings a smile, but it is soon gone, and it might even leave a stomachache later.