published : 2023-09-29
UAW and Automakers Should Unite Against Washington, Not Each Other
Bidenomics is Hurting UAW and Automakers Due to Inflation's Hidden Tax
In October 2021, I warned on this site that the inflationary fallout from Bidenomics would lead to an increase in labor unrest and strikes.
Two years later, we have witnessed the largest auto strike in history.
The root cause of this conflict lies in the fact that inflation is a hidden tax that silently robs both employers and employees of their purchasing power.
Instead of pointing fingers at each other, it's time for the UAW and automakers to direct their blame towards Washington.
President Joe Biden's economic agenda, characterized by extensive government spending, borrowing, and money creation, has resulted in inflation.
Since Biden took office, consumer prices have surged by about 17%, while business prices have risen even more.
This leaves companies with reduced margins, making it challenging to provide significant raises to employees.
As a result, real weekly earnings have declined nearly 5% under Biden, while real corporate profits, especially in manufacturing, have been consistently falling.
The truth is, inflation acts as a hidden tax, and the trillions of dollars in excessive government spending over the past three years are still being paid for today.
The evidence of the inflation tax is stark when we compare nominal and real net household wealth.
Although net household wealth has soared to record highs under Mr. Biden, the increase has been largely wiped out by inflation.
Real net household wealth is now roughly the same as it was at the end of 2020, indicating that the government has confiscated almost all the wealth gained during the last two and a half years.
With falling wages and a pro-labor president, unions like the UAW have gained confidence in demanding substantial pay increases to compensate for the inflation tax.
From the perspective of auto manufacturers, offering a generous 20% raise is more than reasonable, considering the rising costs associated with inflation and the Biden administration's costly 'green' agenda.
However, for autoworkers, the 17% inflation under Biden erodes a significant portion of that raise.
The UAW is pushing for concessions amounting to over $130 per hour in wages and benefits.
While manufacturers and unions are far from reaching an agreement, blaming one side or the other for inflation holds no weight.
Businesses and laborers do not create money; they can only distribute existing funds.
Furthermore, businesses strive to increase profits, while unions fight for better compensation, regardless of the president in power.
Only the government holds the power to create money and, consequently, cause inflation.
The Federal Reserve's creation of trillions of dollars between 2020 and 2022, resulting in a 40% increase in the money supply, was driven by financing the massive deficits generated by Congress and the president's spending bills.
This brings us back to the essence of the issue: inflation as a hidden tax imposed by the government.
The surge of money injected into the economy initially creates an illusion of increased wealth, but soon prices begin to rise.
Over time, the extra money is absorbed by higher prices, leaving consumers unable to afford what they could before the excess money was introduced.
In reality, the average American family, with two working parents receiving average weekly earnings, has seen its purchasing power decrease by approximately $5,200 since Biden took office, despite nominal pay increases.
It is crucial to recognize that excessive government spending is detrimental to both employers and employees, as it robs them of their wealth.
Rather than engaging in a zero-sum game, the auto companies and the UAW should focus their efforts on pressuring Washington to reduce spending, as it is their common enemy and the root cause of their shared troubles.