Have you noticed your dollar doesn’t stretch quite as far this year as last year? It makes no difference if you’re spending that dollar on food, utilities, school clothes for the kids, or getting the dog vaccinated. That dollar doesn’t achieve the same results as it did a year ago. What could be the problem?
Don’t you dare claim that there’s inflation! President Biden and his White House Press Secretary strike back against any, and all who maintain Biden policies are fueling massive inflation now at epic levels unseen since the peanut farmer from Georgia took office in 1977.
Why are prices so high and goods and products so tough to get? The answer to that will vary dramatically depending on who answers that question. Most economists quickly respond with the “I” word: “Inflation.” But, other economists call this inflation that indeed has joined our lives as just being “transitory” — that it will quietly melt away during early 2022 as the supply of goods and products regain their regular cycles.
So who’s got the correct answer?
Last week, President Biden went to Baltimore to address a group there about the current economic problems for all Americans. Inflation dominated the conversation. But, as usual, Biden blamed our inflation on everything and everyone other than his policies and his decisions. As always, he comforted his audience with promises that things would get better soon. Why? Because President Biden is “getting it done!”
Is “Bidenflation” Going to Continue and Rise Even Higher?
It costs more to pay rent each month, fill up a gas tank every week and put food on the table every day. So, at a moment when the dollar doesn’t go as far as it once did, should Americans worry that injecting another $1.85 trillion into the economy might increase inflation?
No, Jen Psaki told Peter Alexander this week. And why not? Well, the White House press secretary explained to the NBC News correspondent, “Because no economist out there is projecting that this will have a negative impact on inflation.”
Of course, that isn’t true. There are many economists out there, and some warn that the Build Back Better plan will further increase the prices that dog consumers and can doom the careers of politicians. But the existence of economists with views contrary to those held by the president’s National Economic Council isn’t entirely the point. At issue is the fulfillment of something Joe Biden said back in April 2020. “Milton Friedman,” he said as a candidate, “isn’t running the show anymore.” And nothing could be more authentic now that Biden is the president.
As the first year of his administration nears completion, inflation has emerged as an unwelcome Biden partner. It has not hit the double-digit levels that propelled Friedman, the late Nobel Prize laureate who warned about the dangers of an unchecked money supply, to prominence in the late 1970s. But consumer prices jumped 6.2%, years over year, in October, the most significant such increase in three decades.
“There’s no doubt inflation is high right now. It’s affecting Americans’ pocketbooks. It’s affecting their outlook,” Brian Deese, director of the National Economic Council, told Chuck Todd on NBC’s “Meet the Press” Sunday. “But it’s important that we put this in context. When the president took office, we were facing an all-out economic crisis.”
The White House argues that those inflation numbers are “transitory” and will eventually come down. The temporary pain that consumers feel, they contend, is the result of pent-up demand and kinks in the supply chain, not because of excesses in government spending. Two of the president’s other economic advisers, Jared Bernstein and Ernie Tedeschi, dismissed early inflation warnings and predicted that price increases “should fade over time as the economy recovers from the pandemic.” That was in April.
But lingering inflation hasn’t diminished the administration’s appetite for spending: the $1.2 trillion infrastructure plan signed into law this week or the $1.85 Build Back Better plan that’s still pending in Congress. The White House has shooed away concerns in recent weeks by pointing to a letter from 17 Nobel laureates who predict that the spending “will ease longer-term inflationary pressures” and to an analysis by Moody’s Investor Services that reached the same conclusion.
“They’re all wrong,” said Steven Hanke, a professor of applied economics at Johns Hopkins University. He doesn’t deny that supply chains are backed up or that there may be pent-up demand. But Hanke stated that those are “ad hoc excuses.” Inflation is being driven by “the money supply which has increased by over 35% since COVID-19, an unprecedented explosion since World War II.”
Along with John Greenwood, chief economist at the investment management company Invesco in London, Hanke compares the situation to a bathtub with three drains. The first two drains are economic growth and savings. In the absence of inflation, money that flows into the tub easily flows out of the tub through those two drains. “But if more money is flowing in than out,” the two maintained in a recent Wall Street Journal op-ed, “the level of money rises. It will eventually reach the overflow, which is the inflation drain.”
An alumnus of the Reagan administration and a fervent supply-sider, Hanke notes that between December 2019 and August 2021, the supply of dollars in circulation grew by $5.5 trillion, “a stunning 35.7% increase in only a year-and-a-half, driven primarily by the Federal Reserve’s purchase of Treasury and mortgage-backed securities.”
Enter Biden and his human-infrastructure package. In Detroit on Wednesday, the president argued that his plan “is fully paid for” and does not increase the deficit “one single cent.” The administration insists that the spending plan would be paid for by new taxes on top earners who make more than $400,000. That might be true if the bill reaches Biden’s desk includes those tax increases, an unpopular possibility currently being debated in Congress. But that’s a big if: Sen. Joe Manchin, a must for passage in the upper chamber, has repeatedly expressed his concerns.
There are other snags. As the New York Times reports, the head of the Congressional Budget Office warned Monday that cracking down on tax evaders would produce about $120 billion, not the $400 billion Biden is relying on to cover some of the spending. While a complete formal analysis is still expected, Hanke and others argue that deficit spending “makes the Fed’s job a lot more difficult” because when the Treasury Department issues new bonds to cover that debt, “what are they going to do? Say, ‘Oh, no — we’re not going to buy anymore.’ They are buying those bonds. That’s why the balance sheet of the Fed gets bigger and bigger. And that’s why the money supply gets bigger and bigger.”
“The notion that increased government spending doesn’t carry the risk of inflation,” said Michael Jay Boskin, an economics professor at Stanford University’s Hoover Institution, “is economically illiterate.” Increased government spending adds to the total demand for goods and services, he said, “such that we are risking inflation, and the Biden administration seems to be trying to divert attention. There is a risk that inflation may become entrenched. It’s hard to imagine a worse outcome than an inflation spiral.”
Chairman of the president’s Council of Economic Advisers from 1989 to 1993, Boskin notes that “a very large fraction” of the relief payments the federal government sent out in 2020 and 2021 was either saved or has yet to be spent. “That is a lot of government spending floating around the system now in the pockets of consumers and the budgets of state and local governments,” waiting to flood the economy further.
On the question of inflation, examples of it existing currently are plentiful—a flood of dollars chasing too few goods. The money supply is an overflowing bathtub. But anti-tax conservative Stephen Moore prefers a more colorful one: “dumping gasoline on a forest fire.” A member of former President Trump’s economic task force, Moore questions the Biden administration’s explanation for inflation, precisely the idea that the problem is pent-up demand post-pandemic. “Because if that’s the case, why did we spend $2 trillion earlier this year,” he said of the American Rescue Plan. “It doesn’t make any sense.”
The White House likely won’t heed his warnings or those of any naysayers. Analysis from Reagan and Bush alumni — let alone Trump advisers — certainly isn’t in fashion in this administration, especially since, as Biden noted more than a year ago, Milton Friedman “isn’t running the show anymore.”
What’s missing from this administration are the “answers,” not the “wishes” of what can and will be done by this government to trample inflation to death. Additionally, instead of continually telling Americans, “My administration is going to do everything possible to kick inflation to the curb. It’s a natural occurrence anytime an economy comes roaring back quicker than it shrunk. I took this head-on even before I took office. We’re getting it done.”
Those empty words from Biden merely echo similar empty rhetoric he used to tell us how he had tackled the supply chain issues even before he was sworn into office! Of course, his claims are never followed with specifics that verify something IS going on to fix the supply chain.
There’s one terrifying thing about our inflation problem: Biden historically is quick with words and always makes promises that fit “a” moment. He, nor Psaki, nor anyone else in his group have given us definitive processes that he claims were initiated January 20th and even before. And because he seldom speaks to real journalists who ask real questions, we have little or no idea if there are even plans to curb inflation.
At first, it was humorous to watch Mr. Biden embarrass himself in so many ways. Then, it became sad. Now, it is horrifying to think that there probably has been NOTHING done about inflation!
Whoever is or are the handlers of President Biden needs to understand something: Americans’ concerns are turning to panic regarding the nation’s financial dilemma that dramatically destroys the value of their dollars. That is happening while President Biden still touts the rising income levels of American workers. He fails to acknowledge that Bidenflation surpasses any financial gains those pay hikes initiate.