On the menu today: The news cycle is always busy, but there’s something strange about the way that inflation — a persistent, pressing problem that just about all Americans feel just about every day — falls out of the news cycle for days or even weeks at a time. Friday brought grim new numbers that didn’t make much of a ripple; maybe lots of Washington reporters were too busy getting ready for the White House Correspondents Dinner. Maybe it’s just that there’s not much new to report — “Bad inflation is still bad. Film at 11” — or maybe, like the Democratic officials they cover, a lot of reporters would prefer not to dwell on the issue that is currently crushing the Biden administration and congressional Democrats.
Why Inflation Isn’t Getting Any Better
If it doesn’t feel like inflation is getting any better . . . your instincts are right:
The core personal consumption expenditures price index, which measures costs that consumers pay across a wide swath of items and accounts for how behavior changes in response to market dynamics, increased 5.2 percent from a year ago, according to the Bureau of Economic Analysis.
However, that was slightly below the 5.3 percent reading in February, which was the highest since April 1983.
Including volatile food and energy prices, the PCE index accelerated by 6.6 percent, the fastest pace since January 1982. Headline inflation was up 0.9 percent from February, much faster than the previous 0.5 percent increase.
A reduction of one-tenth of one percentage point in the rate of increase is not the sort of improvement that people are going to feel when they’re paying their bills. During his State of the Union address, President Biden said that, “Too many families are struggling to keep up with the bills. Inflation is robbing them of the gains they might otherwise feel. I get it. That’s why my top priority is getting prices under control.”
Not much has changed in the two months since that pledge, and perhaps we shouldn’t be surprised; last July, Biden insisted that, “There’s nobody suggesting there’s unchecked inflation on the way — no serious economist.”
In remarks to small-business owners Thursday, President Biden did not use the word “inflation” or mention rising prices or supply costs. But he did call the 51-year-old administrator of the Small Business Administration “kiddo” and boast that, “Thanks to the economic strategy, more — more small businesses are being created, and small businesses are creating more jobs faster than ever before.”
Apparently, the Biden administration’s approach is to just insist that the economy is doing great and hope people believe it, despite their mounting frustration every time they buy groceries, out to eat, or fill up their tank. On the day President Biden took office, retail prices for gasoline averaged $2.38 per gallon. This morning, they are $4.19 — not all that different from the $4.20 they were a month ago.
(It is a near-ironclad rule that every time I refer to the national average gas price, some schmo on Twitter argues that the price he’s paying is much higher than that, or more often, some schmo on Twitter argues that the price he’s paying is much lower than that, and I am exaggerating the high price of gas because I am a remorseless right-wing hack out to smear the administration. The fact that I am using prices from AAA and the Energy Information Administration eludes them. The concept of a national average, and that it might differ from prices near them, is also apparently beyond the comprehension abilities of these MENSA candidates. Or, some schmo points out that the price in the photo accompanying the piece doesn’t match the price listed in the article, or that the gas station in the photo must be “mythical” even though there is a caption that states when and where it was taken. I know it will shock you, but my editors and I have access to a finite number of stock photos, and I suspect photographers at wire services and stock-photo companies are more interested in taking pictures with shockingly high prices listed. Yes, some places in California have wildly high prices, sometimes two dollars or more per gallon than the national average. God help you if you live in the San Luis Obispo metro area, where the average price of a gallon of regular gas is currently $5.95.)
By and large, Democrats just don’t want to discuss or acknowledge inflation — at least not in their campaign ads:
And as of Friday, [Ohio Democratic Senate candidate Tim] Ryan was one of seven Democratic candidates who have run ads this year that mentioned inflation, according to the media tracking firm AdImpact. By contrast, dozens of Republican candidates and allied groups have done the same. In polls, Americans have cited inflation as a top issue.
“Burying your head in the sand,” Mr. Ryan said, “is not the way to approach it.” Asked about the biggest challenges facing his party, he replied, “A response to the inflation piece is a big hurdle.”
To Democrats, inflation is like Bruno: We just don’t talk about it.
Yesterday, CNN wrote that, “Thankfully some analysts think that the burden could soon ease, and that we’ve reached an inflationary top.” Indeed, the Federal Reserve is expected to raise interest rates half a percentage point this week, which most economists think will help, at least a little. But there’s a big difference between inflation peaking and inflation not being a factor in voters’ minds. And a few days ago, Biden’s energy secretary, Jennifer Granholm, offered a realistically cautious sentiment that goes against the administration’s happy talk: “This is the 2023 budget, so, you know, some economists are suggesting that inflation is going to level off a bit, but it’s just so hard to know.” When prices are jumping month to month, it’s hard for a cabinet secretary overseeing a lot of construction projects to know how much those projects will cost when fiscal year 2023 begins on October 1, 2022.
There’s also still the fundamental problem of too much money chasing too few goods. George Leef described it succinctly on the Corner a few days ago:
When governments — going far back into history — want to spend more than they take in, they resort to currency debasement. The Romans put less and less silver into their coins so they could produce more of them. In Weimar Germany, the government printed up paper money in vast quantities, adding many zeroes to the number of marks each bill was worth. In modern America, the Fed creates money out of thin air to buy up government securities. The result never varies — each unit of money loses value, meaning that prices increase in general.
[Steve Forbes, Nathan Lewis, and Elizabeth Ames] explain how this works in clear English. They also make the important point that generally rising prices are an effect of inflation. The inflation is the excessive creation of money. That leads to rising prices as well as other bad consequences, including the distortion of investment, the loss of trust among economic actors, the erosion of savings, and heightened corruption.
In other words, there is no way a government can spend its way out of an inflation crisis. And yet that’s what Biden and his team want to do — forgiving student-loan debts, enacting $45 billion in new spending on climate change, throwing around the idea of having the IRS send every American gas cards, and so on. Biden’s reflex is to throw money at a problem — but when the problem is too much money and too few goods, that’s like trying to put out a fire with gasoline.
In a typical non-pandemic year — let’s say 2018 — the U.S. government spent $4.1 trillion. In 2020, federal expenditures leapt to $6.5 trillion, and in 2022, they’re estimated to be at $7.2 trillion. Deficits that had been a thoroughly unpleasant $779 billion to $981 billion per year ballooned to a mind-boggling $3.1 trillion to $3.6 trillion per year. If you throw that much money into the U.S. economy that quickly, without a parallel increase in goods produced, you get inflation.
If you want to stop inflation, stop throwing more money into the economy!
In today’s Wall Street Journal, Arthur Laffer and Stephen Moore point out that “a little inflation is good for an economy” never seems to pan out:
First, inflation is a double whammy on Americans’ salaries and lifetime savings. The demand-siders are wrong. Their argument is that Mr. Biden’s multitrillions of government spending and welfare programs are putting more money into people’s pockets that is translating into higher consumer demand, which means higher corporate profits.
This argument isn’t panning out. In the past 12 months workers have seen the purchasing power of their paychecks decline by 3 percent — a faster pace than at any time in at least a decade. For shareholders, those frothy profits that companies have been reporting may be illusory. Over the past year stock markets have fallen slightly in nominal terms, but when adjusted for inflation the values are down more than 10 percent.
With poll after poll showing that inflation is foremost in voters’ minds, you would think that the president would be holding regular events focused on the problem and showcasing what his administration is doing to solve it.
Not seeing much of that, are you?
ADDENDUM: In case you missed it yesterday, Department of Homeland Security secretary Alejandro Mayorkas insisted that Nina Jankowicz is “absolutely” politically neutral; the easily overlooked Disney executive who donated $10 million to help President Trump in the 2020 election cycle; and which governments around the world are most in denial about their Covid-19 deaths.