October’s year-over-year inflation rate of 7.7% ought to have politicians worried — especially Democratic politicians whose policies have contributed to the crisis. Yet it seems some prominent Democrats appear to be totally in the dark about their responsibility for inflation.
On Meet the Press this month, Sen. Elizabeth Warren (D-MA) blasted Federal Reserve Chairman Jerome Powell for raising interest rates in an effort to curb inflation. Expressing deep concern for increased costs to families, she argued raising rates would have no effect on high prices and risk a recession: “The Fed has been way out on the extreme,” she said.
But the Fed wouldn’t be raising rates so rapidly right now if the government hadn’t spent the past two and a half years passing inflationary policies — policies supported by Warren and her fellow Democrats. The so-called “American Rescue Plan,” for example, pumped nearly two trillion dollars of stimulus into the economy at the same time the government was restricting supply through stringent COVID-19 lockdowns and vaccine mandates. Evidently, Warren sees no connection.
Across the board, Democrats have been vague in their theories about why we’ve experienced so much inflation. But they’ve generally agreed that it boils down to three causes: supply chain disruptions caused by the pandemic, the war in Ukraine, and “corporate price gouging.”
There’s no doubt we experienced massive supply disruptions during the pandemic. With workers constantly out sick, and many more at home quarantining, it was impossible for companies to maintain previous levels of productivity. But it wasn’t the pandemic alone that led to supply chain issues. It was also the government response to the pandemic.
It was the lockdowns — when “nonessential” businesses were forced to close, often with little notice and without any assurances about when they may be able to reopen.
It was enhanced and extended unemployment benefits that allowed the jobless up to an astounding 39 weeks of free money, which incentivized them to stay home even when they were able to go job hunting again. It was shutting down vast sectors of the economy and at the same time shelling out trillions of dollars in stimulus checks.
At least Democrats recognize that market forces affect inflation. They’re right that supply chain issues contributed to inflation, but they’re dead wrong when they assert that inflation has nothing to do with the demand side.
When analyzing price changes, you have to look at both supply and demand to get an accurate picture. Even as the government was restricting supply with lockdowns, it was actively trying to boost demand with relief checks, enhanced unemployment benefits, and low interest rates — all policies that were enthusiastically supported by Democrats.
Of course, the stated goal of government spending was not to increase demand, but to keep it at the same level as before. But with supply severely constrained and demand kept artificially high, the effect was inflationary pressure.
To be sure, the war in Ukraine also contributed to inflation across the world. But as many others have pointed out, inflation started ramping up before Russia invaded Ukraine, so it can hardly be as significant a cause as Democrats seem to think.
Nor can inflation be blamed on some vague, unmeasurable increase in “corporate greed.” Corporations were no less greedy when inflation was at 2%. Nothing has changed there to cause the massive rates of inflation we’re seeing. For Democrats, the concept of corporate greed is nothing more than a convenient scapegoat — because it means that they don’t have to reckon with the inflationary policies that they have so strongly advocated these past two and a half years.
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Tyler Curtis (@tylercurtis42) is a contributor at Young Voices. He received a bachelor’s degree in economics from Missouri S&T and currently works as a loan officer at a Missouri bank.
