The old saying goes that if you place a frog in boiling water, it will jump out immediately; but if you place it in cold water and gradually heat it, the frog won’t notice until it’s too late. This metaphor aptly describes the current state of the American economy. While inflation has captured headlines and prompted swift action, a series of gradual, industry-specific interventions have quietly been undermining economic growth.
Inflation is an economy-wide phenomenon that quickly draws public attention. As prices rise across the board, consumers and businesses feel the pinch, leading to demands for policymakers to take corrective measures. This often results in tighter macroeconomic policies to rein in inflation, allowing growth to resume once stability is restored.
However, when governments introduce targeted tariffs, subsidies, regulations, and price controls in specific industries, the immediate impact is less apparent to the average person. These interventions create inefficiencies, distort markets, and hinder economic flexibility, but they seldom elicit the same public outcry as inflation. Over time, though, their cumulative effect can be just as damaging.
In the United States, President Joe Biden’s administration has focused on combating inflation, supporting the Federal Reserve’s efforts to stabilize prices. Yet, at the same time, it has increased government spending through initiatives like the Inflation Reduction Act and maintained or introduced a variety of industry-specific measures.
For instance, the tariffs on steel and aluminum imports imposed by the previous administration remain in place, leading to some of the highest steel costs globally. This not only affects industries directly using steel but also raises production costs for sectors like automobile manufacturing. Additionally, subsidies and tax incentives are being provided to electric vehicle producers, further distorting market dynamics.
The administration has also imposed tariffs on solar panel imports despite its environmental priorities and has offered substantial subsidies for investments in semiconductors and batteries. In the pharmaceutical sector, price caps have been placed on certain prescription drugs for Medicare patients, and government negotiations on drug prices could lead to shortages and discourage the development of generic alternatives.
These targeted interventions, while individually small, collectively contribute to an economic environment where growth is stifled. They introduce distortions that can be more challenging to reverse due to the lack of immediate public pressure and the resistance from industries benefiting from these policies.
Drawing parallels to the boiling frog analogy, the U.S. economy risks being slowly undermined by these gradual policy decisions. Without broader recognition and action to address these inefficiencies, the pursuit of short-term objectives in specific sectors may come at the cost of long-term economic vitality.
Reference(s):
cgtn.com
