Billionaire entrepreneur Elon Musk laid out the exact cause of inflation and why Democratic presidential candidate Kamala Harris’ proposed remedy would only exacerbate the problem.
Musk responded Friday to a series of posts on X that started with remarks Harris made at a campaign event in Wisconsin earlier this week.
“We believe in a future where we lower the cost of living for America’s families, so that they have a chance not just to get by, but to get ahead,” she said. Good start, pretty much everyone wants that.
“Because while our economy is doing well by many measures, prices for everyday things like groceries are still too high,” Harris continued. Yes, good.
But that’s when she went off the rails saying that as California’s attorney general she “went after price fixing schemes.”
“And when I am president, it will be a day one priority to fight to bring down prices. I will take on big corporations that engage in illegal price gouging. I will take on corporate landlords that unfairly raise rents on working families. I will take on Big Pharma and cap the costs of drugs,” Harris pronounced.
So her assessment of the primary cause of inflation in the U.S. is that companies and landlords suddenly got greedy during the Biden administration and unfairly raised their prices?
Great message from Kamala today: “It will be a day 1 priority to fight to bring down prices. I’ll take on big corporations that engage in illegal price gouging. I’ll take on corporate landlords that unfairly raise rents. I will take on Big Pharma and cap the costs of drugs.” pic.twitter.com/Jslxf0i6om
— Faiz (@fshakir) August 8, 2024
Do you think Musk has it right?
So Harris wants price controls, with the government intervening in the market and dictating the cost of goods rather than supply and demand, and the result will inevitably be less supply, because that’s the way the market works.
The U.S. tried this during the Nixon administration in the 1970s, and it was an abject failure, as it was in the former Soviet Union and other Eastern bloc communist countries — where it resulted in shortages in food and consumer goods across the board.
When the market is working as it should companies either expand their ability to make more goods or new ones jump in to meet consumer demand.
The supply then increases causing prices to stabilize and even come down. That’s how a free enterprise system works, and it’s what made the United States the wealthiest nation in the history of the world.
Musk echoed Ronald Reagan’s 1981 inaugural address when the nation was experiencing double-digit inflation. The newly-minted 40th president said, “In this present crisis, government is not the solution to our problem, government is the problem.”
Musk posted on X, “The rise in prices (inflation) is caused by government overspending, which increases the amount of money faster than the increase in goods & services output.”
“That is the vast majority of the problem. Inflation was particularly bad during the Covid years, as there was massive government spending, despite productivity plunging, as people were forced to stay home,” he continued.
The problem has continued even after the COVID years. The federal deficit is expected to be nearly $2 trillion this year, up from $1.7 trillion last year.
“This [over spending] is further exacerbated by excess regulation,” Musk argued, “which prevents the market from solving an unmet need (eg housing in high-demand areas).”
The rise in prices (inflation) is caused by government overspending, which increases the amount of money faster than the increase in goods & services output.
That is the vast majority of the problem.
Inflation was particularly bad during the Covid years, as there was massive… https://t.co/G9s6OKvZyO
— Elon Musk (@elonmusk) August 9, 2024
He also acknowledged, “Occasionally, there is monopolistic behavior by companies, but this is relatively rare and usually only possible if those companies have gained control of their industry regulator. Again, a government, not private sector, problem.”
In 2022 Larry Kudlow — a former top economic adviser to Presidents Reagan and Donald Trump– further explained the cause of nation’s high inflation under Joe Biden, which would no doubt continue under a Harris/Minnesota Gov. Tim Walz regime.
“Look, you had prominent Democrat economists and Republican economists a year ago predict rising inflation because of huge social spending, aggregate demand increasing, deficit finance, too much borrowing and too much money printing,” Kudlow said at the time.
“And then you had the war against fossil fuels at exactly the wrong time,” he added, referencing the Biden administration greatly restricting oil exploration and drilling on federal lands and offshore.
In a February 2021 opinion piece for The Washington Post, former Clinton Treasury Secretary Larry Summers wrote that passing the $1.9 trillion American Rescue Plan as the economy was already well on its way to recovery would “set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”
After it passed the following month, Summers called it “the least responsible macroeconomic policy we’ve had in the last 40 years.”
Further, former Obama administration Treasury Department official Steven Rattner in a November 2021 article for The New York Times identified the American Rescue Plan as the “original sin” leading to high inflation.
He pointed to Summers’ warning as well as “many others.”
“We worried that shoveling an unprecedented amount of spending into an economy already on the road to recovery would mean too much money chasing too few goods,” Rattner noted.
Kudlow told Fox News that’s exactly what happened.
The successful economic policy implemented under Reagan in the 1980s is known as supply-side economics.
“The tax hikes and the environmental restrictions [under Biden] are suppressing the supply side of the economy — not enough goods. And the spending increases the demand side of the economy — too much cash,” Kudlow said.
“If you are going to spend more than you can produce, well, prices have to go up. And the obvious solution is to spend less and produce more.”
