Inflation 101

Categories : Financial, News
April 24, 2024

A palpable sigh of relief can be heard throughout the land, as Tax Filing Day is again in the rearview mirror. However, an escalating cost of living remains in our faces, as we visit gas stations and grocery stores for life’s necessities, only to return home, and pay our increasing monthly bills. Whatever inflation’s cause, we need to nip it in the bud, as we are all suffering from the ravages of ever-higher prices.

Perhaps nowhere is inflation more oppressive than in supermarkets across the land. Feeding our families has become an onerous financial chore, as some of life’s necessities have been hardest hit by high prices. Dairy, and especially eggs, are poster children for our economic misery, hence our topic today. In times such as these, we look to the current Administration in Washington, D.C. for answers. What will they do to bring down inflation?

One current inflation-fighting “suggestion” from the White House is to increase Corporate Tax Rates from 21% to 28%, thus moving American business taxation from competitive internationally to an outrageous high, by undoing half of the Trump Era rate decrease (35% to 21%).

Only a basic understanding of economics is required to know that when corporate taxes are increased, costs rise, and those increased costs are passed along to consumers. Under these proposed higher taxes, egg prices would rise, not fall. That understanding does not require a college degree, so why is this folly being promoted? It’s called Politics over Economics: business as usual in Washington, D.C., where class envy and wealth envy are ubiquitous. “Wishing and hoping” is not an effective economic policy.

Free market economies operate on the fundamental principle of supply and demand. Price stability is realized only when the two are in balance. Price changes occur when the balance shifts on one or both sides of the equation. More supply begets lower prices, as does reduced demand. Upward shifts in demand, as well as reduced supplies, bring us higher prices.

Eggs are among the most basic essentials for feeding families, and we have a growing population. Costs must come down in order for producers to react by lowering prices and increasing production. Raising taxes does not lead to reduced costs of retail goods and services.

Increasing egg supplies would reduce market prices. However, producers have been adversely affected by increased transportation costs, as well as higher feed costs for hens, because of government over-regulation. Fewer restrictions on energy production and agriculture would stimulate supplies and reduce costs. Adhering to standard economic fundamentals would lead to a decline in market prices for eggs. We would all benefit.

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