If you're feeling frustrated and confused by the current economic climate (and honestly, who isn't?), I've got a resource for you. I recently had a conversation with Diana Furchtgott-Roth, an economist, professor, and author, and wow – she cuts through the noise like a hot knife through butter.
This isn't some armchair commentator – Diana has real-world policy experience as former Deputy Assistant Secretary for Research and Technology at the U.S. Department of Transportation. She understands how the gears of government and the economy actually work... and more importantly, why they often grind to a halt.
If you want to listen to the full podcast, listen on
Scott here. Lately, I’ve been digging into the perplexing mess of our modern economy. Inflation feels like it's eating our paychecks alive, the price of everything from eggs to gas is enough to make you wince, and finding good workers seems impossible for many businesses.
What in the world is going on?
The answers are complex, but there's one factor that gets economists across the board nodding their heads in grim agreement: politics.
Yep, it turns out those squabbles in Washington don't just cause a stir on Twitter. They have real-life impacts on all of us. Let's dive in with a quick story…
Remember those bare shelves we faced during the early days of the pandemic? Turns out, a lot of those problems weren't just about manufacturing woes. Diana Furchtgott-Roth, an economist and former Deputy Assistant Secretary for Research and Technology at the U.S. Department of Transportation, points to long-standing political gridlock making simple, effective solutions basically impossible.
Think about it: We have some of the busiest ports in the world on our coasts. Yet, for years, restrictions have prevented trucks, trains, and ships from working efficiently and moving goods the way they should. Many economists agree that common-sense reforms could ease some of those bottlenecks. But instead, special interest groups and politicians argue, creating the logjams that contributed to inflation headaches.
It's not just a one-sided problem either. Both the left and the right have their favorite villains and pet projects, none of which seem to make our lives as regular people any easier.
So why does it matter?
Politics getting in the way of good economics may sound abstract. But it hits close to home. Think about:
Next time you're frustrated by empty shelves, soaring prices, or wages that don't seem to cut it – remember, the root problem might be in those fancy buildings in Washington, not just the global market.
History Doesn't Lie
The thing is, this whole "politics ruining the economy" story isn't new. History's filled with examples.
Think back to the 1970s. High inflation? Check. Gas shortages? Double check. To combat high energy prices, politicians of that era came up with a genius solution: price controls. Sounds good right? Wrong.
Price controls might have sounded like they were helping consumers in the short term, but they had all sorts of unintended side effects. Businesses couldn't afford to produce gasoline at the government-mandated price, refineries shut down, and those gas shortages we all saw pictures of? Those were the direct result. Talk about a policy backfire!
Now, I'm not saying all government intervention is terrible. Far from it. But there IS a danger to short-sighted political decisions meant to win favor rather than thoughtfully address problems at their core.
The "Feel Good" Trap
Politicians (and sadly, the voters who keep them in office) often fall for feel-good policies. Sounds great in a speech, right? But the devil's in the details. Often, those seemingly brilliant policy fixes ignore "second-order effects" – the ripple consequences economists can see coming a mile away.
It's tempting to try to shield ourselves from temporary economic pain. But when politicians try to fix prices or impose artificial rules on the market – things rarely end well for anyone involved in the long run.
What Does This Mean For Us?
You're probably not going to single-handedly change how Washington works (if you do figure that out, hit me up, we'll retire early). But there are some things you CAN do:
Hot Spots Where Politics Meets Economics
Let's be real, some economic issues are political lightning rods. Here are a few where things get especially messy:
These are just a few examples. I'm sure you can think of others! Point is, politicians often prioritize winning over fixing when it comes to these divisive issues.
Where's the Hope?
It might all sound pretty bleak. But there IS a glimmer of hope. Sometimes, economic reality gets so brutal that it forces some measure of cooperation. The recently passed infrastructure bill, for all its flaws, did represent some bipartisan work to address real, critical problems facing our country.
The real change might come from the bottom up. As voters become more educated and demand politicians focus on economic fundamentals, maybe we'll see a shift away from feel-good politics and towards real solutions.
What YOU Can Do (Again)
It's Not All Hopeless
Okay, I know – I'm dropping a lot of economic gloom and political frustration on you. But here's the thing: it doesn't have to be this way. We, the regular people, actually have some power in this situation.
Yes, economics and politics are complex beasts. But remember, they're made by humans. Flawed humans, sure – but capable of course correction when enough people make it clear that change is needed.
Imagine if, instead of just complaining about the economy, we all channeled that energy into demanding better. It wouldn't happen overnight, but it would send a signal that can't be ignored.
Economists, for all their disagreements on specifics, generally understand the fundamentals that create a healthy, thriving system. If we push politicians to put those principles above politics, real progress is possible.
Taking The First Steps
Look, I'm not saying you have to run for office or start a think tank. But small actions matter:
Will any of these actions single-handedly fix Washington? Nope. But they build momentum. They add your voice to a growing chorus demanding politicians stop breaking the system and start helping it work for everyone.
A Final Thought
The legendary investor Warren Buffett once said, "Someone's sitting in the shade today because someone planted a tree a long time ago."
I think it’s about time to plant some trees. The economic shade we enjoy in the future depends on it.
If you want to listen to the full podcast, listen on