Hopefully by the time this is published, the war will be over and peace will prevail in Eastern Europe. At the time of this column’s writing, the conflict is escalating. In addition to the horrific humanitarian crisis, the war threatens substantial harm to the U.S. economy.

The “Humphrey-Hawkins Full Employment Act” named after Senator Hubert Humphrey and Representative Augustus Hawkins, was signed into law on October 27, 1978. It charges the Federal Reserve to pursue monetary policy to promote low rates of unemployment and inflation. This is the Federal Reserve’s so-called “dual mandate.”

Labor market shortages do not appear to be improving and in fact, might be getting worse. Labor force participation, defined as the percentage of the population either working or actively looking for work, is at a 44-year low. Only half of the decline in labor force participation experienced during the 2020 shutdown has been recovered. The labor market situation appeared to be deteriorating at the end of 2021, as well as into 2022.

If the 2021 economy could be summarized in one word, I would say it is “disappointing.” Vaccine development and deployment has far exceeded expectations since the pandemic began; anyone who wants a vaccine can get one! The economic recovery in the face of this, however, is far below expectations.

In October, inflation was running at 6.2%, which is three times higher than its 25-year average. How does it get back to 2%, like it was pre-COVID?

In the March 2019 issue of My City Magazine, I discussed the debt ceiling and the government shutdown that spanned December 22, 2018 to January 2019. Now, less than three years later, we face the prospect of another shutdown. The national debt ceiling was recently increased by approximately $450 billion, which prevented a shutdown in October. However, given the sheer amount of borrowing by the federal government, this only kicks the can down the road for another month.

Inflation is a concern. Consumer prices increased by nearly 6% between June and July, on an annualized basis. This means that if prices continued to increase at this rate for a year, then prices would be 6% higher by the end of the year. This is triple the average annual rate of inflation over the last 25 years!

The Centers for Disease Control & Prevention (CDC) recently announced an extension to the eviction moratorium purportedly to slow the spread of COVID-19. This moratorium cannot be justified on economic grounds and is likely to harm the housing market.

Job openings are everywhere. One cannot drive down a street without seeing “Help Wanted” signs in front of most businesses. Anyone who goes to a bar, restaurant or other commercial establishment is likely to encounter slow, short-staffed service.

The idea behind Keynesian economics, as purported by the late British economist John Maynard Keynes and his followers, is that when the economy is in a recession, taxes should be cut and/or government spending increased to stimulate the economy and end the recession. Tax cuts give people more money to spend. Government spending creates jobs in the sectors of the economy that receives this spending. All this spending generates further income as the money is spent and re-spent. The stimulus thus ripples through the economy creating jobs, income, and promoting economic recovery. At least, that is the idea. Reality turns out to be quite a bit different.

Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen have said that if there is inflation, it will be “transitory,” meaning a short-term phenomenon. The argument is that COVID-19 has disrupted global supply chains, resulting in price increases for various goods. Once these disruptions are fixed, inflation should subside. It is like when gasoline prices spike during a hurricane, then fall once the supply comes back online.

Anyone who has driven on the roads lately or traveled by plane knows that America’s infrastructure could use an upgrade. Fifty percent of Michigan’s state and county roads are rated as being in “poor” condition. State roads are in better shape, but their condition is projected to deteriorate and be in poor condition within the next five years. Flying involves crowded airports and flight delays in part due to too few runways and an antiquated air traffic control system. Thus, the $2 trillion infrastructure bill proposed by the Biden Administration could potentially make a big impact.