The growing lack of wage increases as a result of inflation are causing Americans to feel that their finances are becoming tighter. In the past few years, President Donald Trump’s deregulations and tax cuts have helped to boost GDP growth and most Americans’ wages. In contrast, European countries have supported their citizens by increasing wage and real wage support, helping those in the country’s economy. Even though large food manufacturers are doing well due to the current pandemic, large U.S. companies have seen losses in their stocks due to rising inflation and deflation. This, paired with out-of-control federal deficits, could lead to a drop in Social Security and Medicare, making the average American even worse off.
The problem is that these federal deficits are being funded with federal spending rather than with taxes, leading to a formation of liquidity in the U.S. economy. This inflation has made it so wages can not keep up with the U.S. economy and it is not the greedy corporations contributing, but rather the federal government’s spending too much and setting policies that keep investments in places where the economy does not need it.
For example, President Joe Biden’s policies for global trade and foreign investment have been highly protectionist, leading to a trade deficit. His industrial policies and infrastructure set aside funds from necessary competition, which pushes wages down and causes an overall decrease in the economic pie available to Americans.
The trade-off here is between higher taxes (not only on households but also corporations) or a significant increase in federal spending that is then covered by debt. These federal policies have caused the large deficit to reach 5.4% of GDP, leading to the fear of potential cuts to entitlements like Social Security, Medicare and other areas of government.
Addressing the company and the person mentioned in the article: Nestle is a well-known food processing company which has seen its operating margin soar to 17.1% in 2021 thanks to pandemic-related shortages. On the other hand, Kraft-Heinz and Procter & Gamble have seen their operating margins increase to 22.4%, and 27.4%, respectively. Peter Morici is an economist and emeritus business professor at the University of Maryland who has warned about the dangers of America’s out-of-control federal deficits increasing the possibility of negatively affecting Social Security and Medicare, and making Americans feel poorer.
In the end, it is not the large corporations or wealthy benefitting while the working class is struggling, but rather the out-of-control government spending leading to a decrease in the economic pie. To increase the share given back to American citizens, taxes need to be raised to cover the large spending from the government.
