More Gov’t Spending, More Inflation
Like night follows day, pumping trillions of dollars into the economy has yielded another bad inflation report.
7.9% — that’s the annual inflation rate as of February, and that’s before the March gas price explosion that will drive numbers much higher in the coming weeks. Given that government spending is what brought about this massive tax hike on low- and middle-income Americans, it’s maddeningly ironic that the Democrat-controlled House chose last night to pass another 2,700-page, $1.5 trillion omnibus spending spree.
But hey, at least they’ve stopped calling the highest inflation since 1982 “transitory.”
We’ve been through the more specific numbers before, but suffice it to say that gas (38%) and groceries (8.6%) are still the main drivers in the rolling 12-month increase. Surprisingly, another big one, used cars, actually fell for the first time since September, though for the year those prices are up 41.2%.
“To try to stem the trend, the Federal Reserve is expected next week to announce the first of a series of interest rate hikes aimed at slowing inflation,” reports CNBC. “It will be the first time the central bank has raised rates in more than three years, and mark a reversal of a zero-interest-rate policy and unprecedented levels of cash injections for an economy that in 2021 grew at its fastest pace in 37 years.”
That “fastest pace in 37 years” deserves a giant asterisk because growth in recent months comes on the heels of an economic nosedive in 2020 when, two years ago this weekend, the entire nation shut down — some areas for weeks, some for months and years. Regaining what was lost is not the same thing as a real gain, nor is Joe Biden telling the full truth when he boasts about his success by starting from a conveniently low economic baseline.
Speaking of regaining ground, there are still more than a million fewer people employed than in February 2020, yet there were a near-record 11.3 million job openings in January, down slightly from the record of 11.4 million the previous month. And the number of people quitting jobs to take different ones has been at record levels for months. In short, the volatile jobs market has contributed to supply chain issues, which in turn are a factor in inflation.
By far the biggest driver of inflation, however, is what CNBC called “unprecedented levels of cash injections” into the economy. More literal money devalues the money in circulation. Every dollar buys a little less because there are so many dollars chasing a finite and disrupted number of goods and services.
And yet politicians of both parties keep doing it. The COVID shutdowns brought about not just economic malaise but government “saviors” spending gobs of money to keep people afloat. The only argument was who the most politically expedient beneficiaries would be. Now here we are, two years beyond the first shutdowns, and the inflation bill has become far more than anyone wants to pay. Nevertheless, Congress is still passing gargantuan omnibus bills to disguise the waste inherent in such legislation.
“The Biden administration will certainly be scrambling to spin today’s disastrous inflation numbers, but they should simply look in the mirror,” said House Minority Leader Kevin McCarthy. “Exactly one year ago, Democrats rammed through an unnecessary and wasteful $2 trillion bill to fund liberal pet projects. Predictably, this reckless spending binge supercharged inflation.” He slammed Biden’s energy policies — killing American production while becoming reliant on foreign sources — with the correct description “America last.”
McCarthy concluded: “No one is buying Democrats’ desperate excuses for inflation, but everyone is paying for them.” As we’ve said before, voters need to remember that come November.
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