Why is the Fed risking a recession to combat inflection when there are better, supply-side, solutions? Because the Republicans and Democrats have made it impossible.

So debate on the root causes of inflation (Biden, Trump, government spending, Fed money creation, China lockdowns, Russian invasion, etc., etc.) aside, the general reason is simply that demand for goods and services is outstripping the supply and the Federal Reserve is going to attempt to fix it by raising interest rates in an attempt to lower demand by increasing the cost of borrowing money and it’s acknowledged that this may led to a recession.

Rather than decreasing demand, why don’t we attempt to increase supply? Because the Republicans and Democrats have made it impossible.

How to increase the supply of goods and services?

For one thing, we need more workers, but the current number of job openings is twice the number of unemployed, this could be solved with more immigration but the right wing populists who control the GOP would never allow that.

How else? Increase the amount of imports coming into the country by lowering or eliminating tariffs. Almost everything imported from China has a 25% tariff. Again, not going to happen because the Democrats and now even the Republicans don’t believe in free trade.

Ok, how about – as a medium and long term solution – increase manufacturing in the US by reducing the regulatory burden on opening a factory. Once again, won’t happen because Democrats worried about the environment won’t allow that either.