Breaking Our Inflation Fever
Can Kamala's economic platform cure the cost of living crisis plaguing America?
“Ouch!!! Dad! Stop putting that thing in my ear! It pinches! You just took my temperature like…twenty minutes ago. It's just a fever. It’s not like I’m going to die or something.”
It never feels good to realize you are hurting your child, especially when you are just trying to help. It’s not like I didn’t know in the back of my head that I had an obsession with the Braun Thermoscan ear thermometer. The fixation began in 2009 when I had a newborn and a two-year-old ready to start preschool just as the Swine Flu epidemic was sweeping the country before an H1N1 vaccine had been rolled out. Obsessively checking the preschooler’s temperature felt like a sensible way to protect our infant from a new strain of flu that caused hundreds of pediatric deaths. But on the day when I got called out for the painful ear pinching, we didn’t have infants anymore, we had tweens. Now I wasn’t the only one aware that the Thermoscan obsession had gotten out of hand. I’ve never sought professional help for my ear thermometer issue. A good causal explanation of the neurosis would include feelings of inadequacy about a lack of maternal intuition, an extended family incidence of OCD, plus an intellectual bias toward marginal analysis and probabilistic thinking. I knew that a 101-degree fever only posed the tiniest risk of death to a child…but what if it went up to 101.5, 102, or 103? Each marginal tick upward on the Thermoscan placed the child marginally closer to death. But each marginal drop in temperature delivered a dopamine hit to my brain. I’ve never done hard drugs, but the closest feeling I can imagine to the first line of coke or an injection of heroin is the high I would get in seeing 98.6 on Thermoscan and the relief that the fever had finally broken.
Just like thermometer readings help us understand the health of the human body, price level readings help us understand the health of our economy. A hot forehead or a peculiarly timed nap might tell us a kid has a fever. A $10 fast food “value meal” or a $6 “party-sized” bag of Doritos that looks like it could fit a vending machine might tell us the economy has an inflation problem. Deflation, like an abnormal drop in body temperature, can signal that an economy is approaching a death spiral. Our primary caretakers of the economy’s health, the Federal Reserve, anxiously await a target rate of 2% inflation just like the Thermoscan addict longs for a reading of 98.6 degrees.
We are all too aware that the American economy has been running hot over the past two years. 2024 will mark the second straight national election when inflation has stood out as a hot-button issue. Earlier this week, the Harris campaign teased an economic platform that would aggressively attempt to curb price increases in food, medication, and housing. While Kamala's plan would provide much-needed relief for Americans suffering under the burden of a cost of living crisis, part of me worried that artificially capping prices might hide deep structural problems in our economy, in the same way that overmedicating a fever might relieve some suffering yet fail to heal the underlying issue causing the illness in the first place. Even worse, capping prices might be the equivalent of capping the Thermoscan at 102 degrees, providing relief that the readings cannot go higher but depriving us of the unwanted but invaluable knowledge that we have reached a state of emergency.
The Economic Calculation Problem, one of the most compelling arguments for capitalism, was articulated by the Austrian School economists Friedrich Hayek and Ludwig Von Mises. According to Hayek and Mises, the free market gathers and processes information better than any centrally planned economy. Within that free market, prices serve as signals and incentives to move production and distribution of goods toward those who value them the most. Rising prices in a free market are necessarily bad any more than a rising body temperature is in a patient - both are attempts to correct imbalances or disruptions that must be confronted to reestablish equilibrium in the economy or the human body. Artificially reducing prices would stop the market from correcting shortages through increased production or trade. The consequences of not letting the market correct imbalances could be just as lethal as never letting a fever run its course. The millions of lives lost during the Holodomor famine in Ukraine under Stalin and the mass starvation in China during Mao’s Great Leap Forward provide chilling evidence of the suffering that can be inflicted by a centrally planned economy making decisions on food distribution without the information provided by prices and the incentives given to business interests who could move food toward those in desperate need of it. The collapse of communism and the end of the Cold War inspired even greater support for the Austrian School’s Economic Calculation Problem. By the early 21st century it would become accepted wisdom by mainstream economists that direct meddling with prices by the government would cause more harm than good.
So it was no surprise that economists flipped out when there was a suggestion that Kamala’s platform might contain price controls. Economists reminded anyone who would listen that price controls had been a disaster for everyone from the Roman Emperor Diocletian to Richard Nixon. Once Kamala unveiled her actual economic policies during a Friday speech in North Carolina, the economist’s worst fears were relieved. There would be no set table of hard-capped prices, just a directive from her administration to use the FTC and SEC to go after “price gougers” who have captured excess profits through market manipulation. In her attempt to remedy overheating prices, Doctor Kamala is relying on the Democrats' diagnosis that rising costs are due to corporate greed rather than the Republican diagnosis that our predicament was caused by the trillions in spending unleashed by the Infrastructure Act and the Inflation Reduction Act. Harris is betting that economic pain will be relieved by cracking down on price gouging, expanding the Childhood Tax Credit, creating tax incentives for first-time home buyers, and placing a $2000 cap on yearly individual pharmaceutical expenditures.
While Mises' and Hayek’s Economic Calculation Problem should make us skeptical of direct government price controls, it should not make us wary of the Harris Campaign’s economic platform. First, the alternative to Harris's plan is Trump’s tariff-heavy platform which will be even more disruptive to free market operations, and according to most economists, would significantly worsen the cost of living crisis. But more importantly, the industries affected by Kamala's economic platform are already deeply distorted by government intervention. Each year, trillions of federal dollars are spent on housing, agriculture, and healthcare. There is nothing remotely resembling a truly free market in the 21st century for food, housing, and medicine. We are currently spending exorbitantly on subsidies, tax breaks, and incentives only to see a small sliver of the population obscenely enriched while most Americans struggle to get by. Even without Kamala’s proposed interventions, the signals and incentives created by prices for food, housing, and healthcare are out of whack in 2024 America - our economic Thermoscan is already broken.
The concern about the platform unveiled by Kamala is not that it will wreak havoc on a healthy free market but that these actions will only suppress the economic symptoms caused by the perverse collusion between corporate and political power. The bigger risk is that we will miss an opportunity to treat this infection plaguing the American economy. Rather than spend hundreds of millions on SEC and FTC legal fees to artificially lower the price of processed foods that are horrible for our bodies and the planet, why not use that money to directly fund the growing of healthy natural food through regenerative farming that can counteract climate change? Rather than give away $25,000 in housing credits to first-time homebuyers that will also enrich developers, real estate agents, and mortgage lenders why not put that money directly into building quality publicly owned housing like the socially rented apartments in of all places Austria, the birthplace of the most radically free-market school of economics? Rather than merely cap the price of pharmaceuticals at $2,000 a year, why not shift to a Medicare-for-All model that even the Koch-funded Mercatus Center believes will save our country trillions of dollars? If we can fault Doctor Kamala for anything it is not that she is too hands-on in treating the feverish rising prices in housing, food, and healthcare, it is that she is not going far enough in treating their root causes.
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A few years ago my Thermoscan nightmares became a reality. Our oldest daughter came down with Covid for the first time and could not get out of bed in the morning. I carried the Thermoscan into her room and hovered at the side of the bed as she took her own temperature. 104.5. It was a reading I had dreaded for years but had never seen before. I got ready to take her to the hospital but decided to give her pediatrician a call once I thought of the crushing wait times at the ER. “There is no use taking her to the ER,” the pediatrician told us. “All you can do is give her some ibuprofen or aspirin to knock down the fever, and keep her hydrated and rested. There is nothing else the hospital can do for her as long she is not having trouble breathing.”
Even though the pediatrician was saying there was nothing more we could do, somehow I felt reassured in this moment of deep fear. To know we were doing all we could do was a relief from the overwhelming anxiety of the moment. Eventually, my daughter recovered and her fever broke. When I think back to the pediatrician's simple advice of Tylenol and rest during that moment of panic, I hesitate to dismiss Kamala's platform as merely treating the symptoms rather than the causes of our economic ills. Relieving pain and bringing comfort to the suffering is a noble enough goal, especially when so many Americans are hurting financially. Let's hope that Kamala’s relief for those suffering does not breed complacency but builds the strength in our people needed to fight for a more equitable, sustainable, and just American economy.