There’s no way to spin it: Wednesday’s inflation report is bad news for the country economically and for the president politically. The year-over-year overall increase was 6.2 percent, the highest rate in over 30 years. It wasn’t from any particular category of expenditure, either. According to the Bureau of Labor Statistics, the increase was “broad-based,” with significant increases in energy, food, and shelter.
The standout category in this month’s report was energy, which rose 30 percent overall since last year and — incredibly — 4.8 percent in just the last month. More specifically, gasoline was up 6.1 percent since last month and natural gas, used to heat homes, was up 6.6 percent. Energy is an input into everything else, and higher energy prices mean higher prices throughout the economy.
If you’re in the White House, this is the kind of report that you have nightmares about. The inflation rate had seemed to plateau in the last three monthly reports. From the administration’s point of view, it was time for it to turn the corner and start coming back down. It did turn the corner this month — but it’s going back up, and it’s in more categories than before.
The sort of inflation we are currently experiencing is different from notable examples in the past. Then the inflation was almost entirely generated by the central bank, which merely had to correct itself. The Federal Reserve should taper its asset purchases, but it cannot do much to solve today’s problems. Given the historic level of federal debt, the Fed doesn’t have much room to raise rates without significantly increasing government interest costs. Furthermore, altering the money supply or raising interest rates will not cause the Ports of Los Angeles and Long Beach to work more efficiently. It will not create more trucks and truck drivers. It will not make it easier to produce and transport energy.
Plenty of the underlying problems that have been exposed by the pandemic recovery predated Biden’s presidency. But his party’s ideology prevents him from being part of the solution. Democrats see the current situation and want more government and more spending.
Biden didn’t miss a beat, saying Wednesday that “it is important that Congress pass my Build Back Better plan.” But Build Back Better is non-responsive to what ails the economy. There are plenty of things government can do to help, and most of them involve getting out of the way.
We need more truck chassis, but current trade policy creates a combined tariff of over 200 percent on importing them. Labor policy designed in the early 20th century has allowed unions to entrench inefficiency and freeze labor productivity in the transportation sector. Environmental regulations in California have prevented the expansion of port capacity. The federal government has prioritized transitioning away from fossil fuels while begging OPEC to pump more oil. And post-pandemic spending bills both created disincentives to work and provided generous benefits, well beyond what most other countries provided.
Build Back Better either leaves those problems untouched or exacerbates them. It sees government-created problems and prescribes more government as the solution. It won’t work.
Our inflation is an outlier by global standards. Now is not the time to take inflationary risks. Now is not the time to experiment with green-energy policies, which will drive up prices. Now is not the time to do a federal takeover of childcare, which will drive up prices. The United States has bountiful natural, industrial, and human resources. To fully mobilize them in response to the present inflationary pressures, government needs to step aside, not insert itself into more places.
The president’s approval ratings show that the American people have noticed that his policies aren’t working. They’ve noticed higher prices at the grocery store and the gas station. As we head into winter, they’ll notice higher heating bills.
Inflation won’t disappear if the White House pretends it doesn’t exist. Yet again, it seems that a crisis has caught the president asleep at the wheel. If prices keep rising and Democrats keep whiffing, the governor’s race in Virginia might look like a mild reproach compared with the wrath of the voters in elections to come.
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