Poor Policy Leads to Sick Economy

The US economy is sicker than politicians are letting on, and there are policies accelerating this tragedy including regulations, mandates, and inflation.

April 8, 2024

By: Bobby Casey, Managing Director GWP

economy You know the US economy is sick when news breaks that the 99 Cents Only stores are closing down operations, and the Dollar Tree is shutting 600 of its locations. Pretending that the economy is thriving while watching this is to deny reality.

From 1920 to 1921 the US had a depression. Some call it a recession. The difference is in how many consecutive quarters an economic downturn persists. Either way, the economic downturn was sharp and pervasive, and most refer to it now as the “Silent Depression”.

What happened?

  • From May 1920 to July 1921, automobile production declined by 60% and total industrial production by 30%.
  • The U.S. stock market fell by nearly 50%, and corporate profits declined by over 90%.
  • Farmers suffered with over production, falling costs, and high debts.

It is also called the “Recession That Fixed Itself”.

While it sounds very mystical and miraculous, it isn’t. It is a often forgotten case study in how the free market, when allowed to do what it does, can course correct. The government didn’t subsidize anyone or any industry. In fact, it did the exact opposite of what Herbert Hoover and Franklin Roosevelt did: it dramatically cut spending and drastically hiked interest rates.

Contrast that with the timid balancing act the US Federal Reserve is currently performing, trying to use interest rates to offset the borrowing.

The “Silent Depression That Fixed Itself” lasted a little over a year. The Great Depression lasted about eleven years in large part to the government intervention, high spending, and expansion of the welfare and warfare state. Ever since then, we’ve been pretending that an anemic economy backed by debt is in fact healthy.

Fast-forward over one hundred years and the smoke and mirror show continues.

There’s something called an “Idiot Plot”:

In literary criticism, an idiot plot is one which is “kept in motion solely by virtue of the fact that everybody involved is an idiot“, and where the story would quickly end, or possibly not even happen, if this were not the case.

This is an accurate explanation of US economic policy since 1921. At some point, political malfeasance leads to economic malfeasance and you get the fallout.

People are being priced out of homes with high interest rates and unyielding prices. The same is true for the renter market. During the Great Depression, housing became so unaffordable, make-shift shanty towns started cropping up which were called Hoovervilles, named after Herbert Hoover the president at the time.

Today, while there are also many homeless encampments cropping up, a growing number of people are living out of their cars, begging the question of whether these will be called Bidenvilles.

  • Sedona, AZ: The problem has gotten so bad that Sedona, Arizona, recently set aside a parking lot exclusively for these homeless workers. The city is even installing toilets and showers for the new occupants. Apparently, the City Council thought installing temporary utilities was cheaper than solving the area’s cost-of-living crisis.
  • King County, WA: As homelessness continues to grow, so does the number of those living in their vehicles. A 2018 survey of King County, Washington, showed that 3,372 people were living in their cars, a 46% increase from the year before.
  • Los Angeles, CA: In California, older adults have been among the fastest-growing segments of the homeless population. In Los Angeles County, the latest count showed an 11% increase in homeless people 65 and older. And roughly 14,000 people of all ages are living in cars, vans and RVs.

We only have so much bandwidth, generally speaking. We can only do so much at once with the time, resources and knowledge we have. So whether you have the fearmongering of the pandemic, or fearmongering of “Climate Change”, when you prioritize these fears over the immediate and pressing matters at hand such as safety and jobs, the consequences are manifestly devastating.

Last year we saw the Maui fires. We don’t hear much about them anymore in the news because it was only important to push the Climate narrative. Once people realized the Climate narrative was more of an imperative that led to neglect of maintenance, which led to the fires, things got really quiet.

Not that this in any way has slowed the administration’s regulatory ambitions. The EPA released its new rules for tailpipe regulations which basically mandates carmakers have a third of their cars be electric by 2027 and more than two-thirds by 2032.

It’s not just a mandate by the government, it’s a heavily subsidized one to the tune of $22 Billion:

According to an October 2023 report by the Texas Public Policy Foundation, as much as $48,000 of the cost of the average EV sold in the United States is paid, not by the owner, but in the form of “socialized costs” that are spread out among taxpayers and electricity consumers over a 10-year period.

These socialized costs come in the form of taxes, government subsidies, fuel economy credits paid by gas carmakers to EV manufacturers, and higher electricity bills as consumers absorb the capital costs required to expand the power grid and install new charging stations.

Three things are happening that will basically price people even out of their own Bidenville Suite:

  • Forced contraction of the fossil fueled vehicles. Reduced supply with similar demand means the prices will go up on petrol cars.
  • Forced expansion and incentivization of EVs, and the expense of everyone else. This means those who don’t opt in to an EV will essentially be paying for cars they never bought.
  • Forced strain on a power grid that was never made or designed to facilitate these EV mandates in the first place. This will lead to a reprisal of the Maui situation eventually.

In a separate article, there are concerns of energy shortages because people clearly didn’t think through how everything was just going to magically switch to electric from fossil fuels:

Vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology factories proliferate around the country, leaving utilities and regulators grasping for credible plans to expand the nation’s creaking power grid.

It goes on to say:

It is all happening at the same time the energy transition is steering large numbers of Americans to rely on the power grid to fuel vehicles, heat pumps, induction stoves and all manner of other household appliances that previously ran on fossil fuels. A huge amount of clean energy is also needed to create the green hydrogen championed by the White House, as developers rush to build plants that can produce the powerful zero-emissions fuel, lured by generous federal subsidies.

The US government is protracting this economic illness, ignoring all the symptoms, and pushing for more warfare, corporate welfare, and inflation. Wealth transfers are indicative of a healthy economy outside of cronyism, but within that matrix, a lot of people will lose while a handful of people win.

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