Since President Joe Biden entered the Oval Office, inflation in America has become a persistent problem.
In fact, inflation has steadily risen from 1.7% in January to 5.4% in both June and July.
Sadly, this is bad news for consumers, who are more than aware that their money isn’t going as far as it did just a few months ago.
Per the Bureau of Labor Statistics, “The all items index rose 5.4 percent for the 12 months ending July, the same increase as the period ending June. The index for all items less food and energy rose 4.3 percent over the last 12 months, while the energy index rose 23.8 percent. The food index increased 3.4 percent for the 12 months ending July, compared to a 2.4-percent rise for the period ending June.”
Yet, most significantly, “The energy index increased 1.6 percent in July after rising 1.5 percent in June. All the major energy component indexes increased over the month. … The energy index rose 23.8 percent over the past 12 months. The gasoline index rose 41.8 percent since July 2020. The index for natural gas rose 19.0 percent over the last 12 months, while the index for electricity increased 4.0 percent.”
Those are some startling statistics, especially if you are on a fixed income (like most seniors) or a family in the working class just trying to make ends meet.
As the data show, the cost of almost everything is increasing rapidly. Yet, wages remain basically stagnant. In June, hourly wages increased by a microscopic 0.3%.
Inflation, by and large, is much more of a problem for those in the working class because a high proportion of their income is spent on the basics, such as gasoline, food, and home energy costs.
When the prices of these staple items increase substantially (as they have over the past seven months) and wages remain relatively stagnant (as they have for many months), those on the bottom rungs of the economic ladder pay the highest price — no pun intended.
Yet, this seems lost on the Biden administration, which seems oblivious to the fact that its reckless spending bills (and COVID-19 policies) are the primary reasons for the spike in inflation.
Since Biden took office, his administration has passed the American Rescue Plan ($1.9 trillion), has supported the bipartisan “infrastructure” plan ($1.2 trillion and pending in the House), and is on the brink of passing a behemoth budget reconciliation package that would cost a whopping $3.5 trillion.
This amount of reckless spending over such a short period is absolutely unprecedented in U.S. history. And lest we forget, this comes on top of the $2.6 trillion the government allocated in COVID-19 relief funds.
As any economist, or anyone with common sense, knows, when the government showers the economy with trillions of dollars over a short window of time, the value of the dollar declines.
And when this colossal spending comes after an 18-month economic shutdown, in which the production of goods and availability of services declined due to government decree, you now have more dollars chasing fewer goods and services.
No wonder inflation is out of control.
Over the past few months, the Biden administration and the Democratic-controlled Congress (with the help of some Republicans) have embraced modern monetary theory, which basically says that debt and deficits don’t matter. According to MMT, the government can spend and print as much money as it deems necessary, without any repercussions.
However, we are witnessing the abject failure of MMT in real-time. Hopefully, some semblance of fiscal sanity will prevail sooner rather than later.
Chris Talgo ([email protected]) is a senior editor at the Heartland Institute.
