I don’t think anyone can deny there are supply shortages. Why they are happening, and how drastic they are, is certainly up for debate, but all across the spectrum, from CBS, to CNN, to Fox News, there are reports. Photos emerged over the last week showing massive amounts of ships sitting idle off the coast of California. But this event is just one instance among many, of supply chain problems. Over the past year we have had rising prices, and low unemployment. This situation economists call stagflation. It is caused by a drop in short run aggregate supply.
One of the reasons for this drop is that businesses are struggling to find workers. During Covid, the government issued multiple stimulus checks, and increased unemployment benefits. This can certainly be argued as fair considering the government prevented many industries from reopening. But as business started reopening, government stimulus and benefits did not decrease at the same rate. This caused a problem. For many lower income workers, going back to work made them earn less. Their income was less than the government unemployment benefits. It made sense for them to stay home and be paid more in benefits. As more workers stayed home, employers had trouble finding employees, which led to less productivity, which began to cause supply shortages.
There is an opposing idea that this shortage is due to rising demand. This is partially true. It does seem like as people have come out of lockdowns, they have been more willing to spend money on things they were too scared to during Covid. Also, with all the stimulus money, people have had more to spend. But there is no denying the supply shortages all over the world.
One of the main reasons for the supply shortage is the shipping crisis. During shutdowns, shipping became backed up and delayed. This caused shortages for companies who then in turn could not supply goods to other companies. Before long, the entire supply chain began to fray.
There is a large shortage of computer chips. Nearly 75% of computer chips are made in Asia. Because international shipping is not in sync, many U.S. companies cannot obtain the number of chips they need in order to produce what customers demand.
While the Biden administration says they are committed to sorting out the supply chain, transportation secretary, Pete Budigiug, was just given paternity leave. It does seem a bit strange that while our nation is experiencing what could be considered a supply chain crisis, our secretary of transportation is out on paternity leave.
So, who is responsible for this problem? I don’t think it is one individual, but it does seem that the shutdown may have longer lasting effects than we thought. You cannot just turn an economy on and off like a faucet. Supply chains are complex, and when parts are shut down the whole can collapse. It seems like the right course of action going forward would be to open the economy up as close to normal as possible, as fast as possible, and to encourage people to return to their jobs. This would involve cutting down restrictions on businesses, and not offering additional benefits to unemployed workers.
Scourse: CNN, Fox news, CBS, USA today