Robert Reich's inflation fantasy

Former Clinton administration Labor Secretary Robert Reich apparently lives in the same neighborhood as a little blond girl named Alice. That's apparent because he wrote that "The Fed is obsessing about a "wage-price" spiral—wage gains pushing up prices. What it should be worried about is a profit-price spiral. Wages are going nowhere. But profits have been soaring."

Profits haven't dropped so that part's true. What's spin is that "wages are going nowhere." Real wages after factoring in inflation are dropping. Wages are rising quite quickly before factoring in inflation.

Travelling further into Wonderland, Reich wrote "Instead of raising interest rates and slowing the economy toward if not into a recession, Congress and the Biden administration should be taking aim at corporate profits. The Biden administration did pass a 1 percent tax on stock buybacks in the recently enacted Inflation Reduction Act, and a minimum corporate tax. But these measures don't go nearly far enough." It isn't a matter of going far enough or not far enough. It's a matter of them going in the wrong direction.

The right direction is to cut taxes and regulations while helping increase wages and profits. If you boost the supply side instead of suppressing the demand side, inflation will drop. That's what Reagan did.

This is where Reich loses it:

A windfall profits tax, price controls, higher taxes on corporations and the wealthy, and bolder antitrust enforcement are necessary. Otherwise, the onus for controlling inflation falls entirely on the Fed.

That's full-blown stupidity. Higher taxes kill the incentive to manufacture or produce things. Price controls kill the incentive to boost the supply side. Meanwhile, demand persists. That solves nothing. It makes things worse.

Profits aren't the problem. In this video, Reich explains that corporate greed is the villain:

Reich fails to admit that government-imposed regulations stifle competition. Regulations require small business entrepreneurs waste time and money complying with regulations instead of building capital and growing his/her business.

This isn't surprising to people who followed the Clinton administration but Reich is a full-throated socialist. The last thing Reich wants is for a businessman/woman to have the right of self-determination. Reich hasn't noticed that, to use President Reagan's words, government isn't the solution. Government is the problem. Finally, there's this from Reich:

The Fed will be using the blunt instrument of job-sapping and recession-seeding higher interest rates because interest-rate hikes are the only tools in the Fed's tool kit. But they put most of the burden of fighting inflation on average working people and the poor.

What's required is to synch up monetary policy and fiscal policy. The Reagan-Volcker model meant that Volcker restored stability to the dollar, which is the Fed's responsibility, while the Reagan tax cuts and deregulating the energy industry unleashed the animal spirits of the private sector. By the time Reagan ran for re-election, the economy was soaring and Mondale's goose was cooked.