United States President Joe Biden proposes to return factory jobs in America as a solution to the high inflation rate, but some experts see his plan as unreasonable.
For years, American companies had transferred jobs to foreign countries to decrease their costs through lower employees' wages. This practice resulted in lower goods prices and helped ease inflation to sustain economic progress. However, it also led to the loss of around 6.8 million jobs in the US manufacturing industry.
With inflation at a 40-year high, the president blames globalization for the rising costs of commodities. That's because outsourcing advocates overlooked the price of increasingly frequent global supply chain interruptions.
Aside from the COVID-19 pandemic, shortages of basic products such as semiconductors, natural calamities, and, most recently, Russia's invasion of Ukraine, which has sent oil prices rising, have caused recent economic disruptions.
According to US News, Biden announced Friday that the US as a choice to fight inflation "drive down wages and make Americans poorer or have a better plan to fight inflation: Lower costs and not your wages."
He then explained why he believes that boosting the manufacturing of semiconductors in the United States will lead to domestic production of vehicles and other goods. In theory, this would fill the supply chain leading to a drop in prices.
However, according to the financial data firm FactSet, this proposal would take years to implement. The consumer price report due out on Thursday is projected to reveal that annual inflation jumped to about 8% last month.
The Problem With Biden's Plan
According to Douglas Holtz-Eakin, per WOKV, head of the center-right American Action Forum, the problem with Biden is that he is offering a long-term plan to beat inflation while the consumers are hurting day-to-day. He said that semiconductor production facilities have been built in years, but "Inflation is here now, and it is an issue now."
In his State of the Union address, President Biden underscored his plans to address the continued increase of the prices of goods. He also acknowledged that the inflation issue hurts Democrats ahead of the midterm elections as voters feel frustrated about it.
The president insisted that his administration can take actions that include encouraging corporate competition and bolstering a supply chain to meet consumer demands, which is expected to slow down inflation but won't hurt employment and wages.
Republicans Blame Biden for High Inflation
However, Republicans say the president's $1.9 trillion COVID-19 relief program is pumping money into the economy more than is necessary. Republican senators have claimed that rising inflation - from recent norms of around 2% - is completely the president's fault, while the Biden administration argues that the larger issue is the global economy's structure.
Jason Furman, a Harvard economist and former White House economic official during the Obama administration, pointed out in a New York Times report that President Biden can only do little to address the rising costs, but he cannot just tell the public "The only solution here is patience and the Federal Reserve."
"The biggest problem for President Biden is that there's no good way to message inflation," Furman said.
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