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Spring is here and it is time to get ready to golf! Our Annual Spring Swing Golf Tournament is on April 18, 2022 at Sierra Lakes Golf Club. If you need to practice before then, you can do so at the brand-new Top Golf that just opened in Ontario. Today at 5:30 p.m. there will be a Ribbon Cutting at RAW Kitchen & Cantina at 11400 Fourth Street, Suite 105 in Rancho Cucamonga. The food is fantastic, especially the ceviche. Check out the menu at www.rawmixologybar.com. Please support all the great restaurants in Rancho Cucamonga and let me know which one is your favorite. Tomorrow at 6 p.m., the Rancho Cucamonga Police Department will host its Citizen’s Advisory Meeting at Central Park. This is a great opportunity to interact with your police department and learn what is happening in your community.
Supply-chain disruptions, inflation, and a labor shortage continue to undermine our economy. Although these matters have fallen off front page news, they have not gone away. The number of cargo ships waiting to dock in the Port of Los Angeles/Long Beach still exceeds one-hundred, which is ten times worse than a sig-alert on the 10 freeway during rush hour. The delay of goods and materials has a domino effect making everything more expensive, which fuels the inflation problem. Couple this with a shortage of labor and it causes a decline in economic production. A vicious cycle ensues whereas each of these problems fuels the other and the longer it continues the harder it is to break. Reducing government expenditures, tapering unrealistic regulations, and incentivizing work would go a long way to break this cycle.
Improving our economy requires a refresher on the basics of supply and demand. The intersection of supply and demand is the equilibrium point that sets the price. Policymakers often focus on one and not the other, often leading to adverse consequences. If government policy artificially shifts one without the other, than higher prices or shortages result. High gas prices are a case-in-point.
Our nation has squelched supply of gas by reducing production erroneously thinking that demand would decrease. Unfortunately, it does not as gas is inelastic good that people require regardless of price. The less supply, the higher the price. If that happens with tomatoes, then we’d all stop eating tomatoes, but when it happens with gas, we all still need to drive to work. Low-income individuals are hurt the most by it as they have less discretionary income to absorb the higher price. We could increase supply by producing more gas, thereby driving down the price. A ten-year commitment to producing gas would be an instant boom to our economy, lower prices, while allowing time for alternative energy to develop and become more reliable and cost-effective.
The high cost of college is another point. The State and Federal Government have fueled demand by directing money to students to pay for their education. While this has noble intentions, the reality is that Government ignored supply. Increasing the number of students without increasing the number of classrooms and professors means that demand is increasing while supply is stagnant. Eventually you have significantly more students applying for a limited number of spots and the price of college skyrockets. More financial aid to students does not solve the problem. Most of that money should be redirected to building more colleges. Funding only demand without upkeep in supply does not work. Increasing the supply of colleges would decrease the price and lessen the need for financial aid.
There is a housing shortage in California. This can be traced to the many laws that have made housing more expensive to build, thus reducing the supply. When Sacramento tries to mandate a lower price by requiring low-income housing, it disincentives new construction thereby lowering supply while simultaneously forcing the price of other housing to increase to offset the reduced profit margin caused by compulsory low-income housing. Rent control has a similar effect whereby Government artificially sets the price, discouraging construction or the availability of rental units. As a result, the supply of housing does not increase to keep up with demand resulting in less housing and higher prices.
Labor continues to become more expensive with a higher minimum wage and more regulations on employers, thereby making it more expensive to hire. Thus, the price point of labor is artificially set thereby causing disruptions. Meanwhile, California seeks to further reduce the supply of labor with AB1993 – a proposed bill that would require all employees to show proof of Covid-19 vaccine to work in California. If this passes, people will leave the workforce, reducing supply and further damaging our economy. This is only one of many egregious efforts to interfere with private employer-employee relationships that disrupts the labor market. Policymakers should be wise to not further interfere with the job market.
The moral of the above is that every action has a reaction. We cannot and should tinker with supply or demand thinking the other will not be affected. Our elected leaders would be wise to review basic economics before acting or intervening in our economy. After all, we are the ones who must bear the burdens of any erroneous decision and, sadly, there are many. To quote the Economist Thomas Sowell: “It is so easy to be wrong—and to persist in being wrong—when the costs of being wrong are paid by others.” The Chamber is here to assist all businesses and advocate for pro-growth/pro-employer local economy.
If the Chamber can be of any assistance, please contact me at Chairman@ranchochamber.org. Sincerely, your Chamber President, Robert A. Hufnagel.
Robert A. Hufnagel
President-Chair
Rancho Chamber
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