Inflation is sending a loud and clear message to Washington. A message that it is not going away.
Consumer prices increased 7% over the last 12 months, the fastest increase since 1982. Producer prices jumped 9.7%, a near double-digit jump that was the highest year-on-year increase on record.
President Joe Biden has tried to downplay the surging inflation, arguing that price increases are slowing. He makes that argument even though consumer prices have increased more than 5% for 7 consecutive months. This rapid increase in inflation reduced real wages by 2.4% last year. This is an effective wage cut.
The White House has been in denial about inflation for months, first arguing that it was “transitory” and then that it would go away soon. Now, it is blaming inflation on meatpackers and greedy corporations. The fact of the matter is that Washington is to blame for much of this inflation, with its massive deficit spending and monetary easing overheating the economy.
After spending $4 trillion in 2020 on COVID stimulus bills, the administration pushed through another $2 trillion spending bill in March. Former Treasury Secretary Larry Summers said that bill was the “least responsible” economic policy in 40 years and would unleash inflation. Biden then proposed the largest single tax and spending increase in U.S. history and continues to contend that more spending and taxes will reduce, not increase, inflation.
This is nonsensical stuff.
Top line: Inflation is real, and Washington shares much of the blame.
Bruce Thompson was a U.S. Senate aide, the assistant secretary of the treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.
