UAW, Automakers Should Fight Washington, Not Each Other

In October 2021, I warned that the inflationary fallout from Bidenomics would lead to an increase in labor unrest and strikes. Two years later, we have the biggest auto strike in history.

That’s because inflation leaves both employers and employees poorer, and each wants the other side to make concessions. Instead of casting blame on each other, they should be blaming Washington. 

President Joe Biden’s economic agenda can best be summed up as government spending, borrowing, and creating money, with the predictable result of inflation. Consumer prices are up about 17% since Biden took office in January 2021, but prices paid by businesses are up even more. 

That has left firms with smaller margins from which to give raises, a key reason why wages haven’t kept pace with inflation. Real (meaning inflation-adjusted) weekly earnings are down almost 5% under Biden. Meanwhile, real corporate profits have been falling for months, with manufacturing corporations’ real profits falling every quarter for the last year and a half. 

The reason for this sad state of affairs lies in the fact that inflation is a hidden tax. It is a way for the government to silently rob workers and businesses alike of their purchasing power. The trillions of dollars of excess government spending over the past three years are still being paid for today through this hidden tax. 

The sheer magnitude of the inflation tax is evident in the difference between nominal and real net household wealth. Under Biden, net household wealth has risen trillions of dollars to a record high, but that increase almost has entirely been eaten by inflation. Real net household wealth is about where it was at the end of 2020. 

Nearly all the net household wealth generated in the past two and a half years has been confiscated by the government through the hidden tax of inflation. 

The combination of falling real wages and a president who is unabashedly pro-Big Labor has emboldened unions such as the United Auto Workers to demand big pay increases to make up for the inflation tax. 

From the auto manufacturers’ perspective, a 20% raise is more than generous, especially when manufacturers’ other costs have risen not only from inflation but also from the Biden administration’s “green” agenda increasing costs. 

Yet from the autoworkers’ perspective, most of that 20% raise is eaten away by the 17% inflation under Biden. The UAW wants concessions totaling over $130 an hour in wages and benefits. 

Although the manufacturers and unions are far apart on an agreement, some in the media have gone so far as to blame one side or the other for inflation. “Greedy businesses” are accused of creating inflation by hiking prices to increase profits. Likewise, “grasping unions” are accused of creating inflation by demanding higher pay, which will increase consumer spending. 

These accusations don’t even pass the smell test. In neither case do businesses or laborers create money—all they can do is move existing money around. Furthermore, businesses are always trying to increase profits and unions are always trying to increase their members’ pay. These realities didn’t suddenly appear when Biden became president. 

Only the government can create money, and so only it can cause inflation. The Federal Reserve created trillions of dollars from 2020 through 2022, increasing the money supply by over 40% in that short period. This was done to finance the unprecedented deficits created by the runaway spending bills which Congress passed and the president signed. 

The result was a sugar rush in the economy, where everyone appears at first to be flush with cash, but then prices start to rise. As time passed, all the extra money was absorbed by higher prices, so much so that consumers can’t even afford to purchase what they had before the excess money was created. 

This is exactly what has happened to the typical American family with two parents working and receiving average weekly earnings. Their annual purchasing power is down about $5,200 compared to when Biden took office, despite higher nominal pay. 

Excess government spending is the enemy of the employer and the employee because it robs them both. Instead of battling it out in a zero-sum game, the auto companies and the UAW should focus their attention on pressuring Washington to reduce spending, their mutual enemy, and the cause of both their ills. 

This commentary was published originally by Fox News