The latest, awful statistics on U.S. price inflation should catalyze federal officials to stop, and reverse, all the inflationary policies they have pursued for years.
The Federal Reserve Board, President Joe Biden, and the Democratic Congress all are at fault for the surge in prices. All of them must play a role in fixing, or at least ameliorating, this massive problem.
The Labor Department reported Friday that the consumer price index rose 6.8% in the 12 months from last Dec. 1 through Nov. 30, 2021. Worse, the single-month increase in November was 0.8%, which would mean a 9.6% hike if that rate continues for a full year. These are horrible numbers, edging into President Jimmy Carter-land. This is by far the worst U.S. price data since President Ronald Reagan, and the Federal Reserve Board wisely and successfully wrung inflation out of the economy four full decades ago.
The biggest driver of the price explosion has been in energy prices, which are a horrifying 33.3% higher now than just a year ago, with gasoline prices up 58.1% in that period. And food prices in November were up 0.7%, meaning an 8.4% annualized rate.
Five major factors are forcing prices up. The first two are the purview of the Federal Reserve. The Fed has set the “federal funds” interest rate at historically low levels for 13 years now and at “effectively zero” since the beginning of the coronavirus pandemic. It also has engaged in unprecedentedly aggressive financial-asset purchases.
The other three causes are profligate spending by Biden and Congress, supply-chain disruptions caused by a combination of aggressive regulation and COVID-related bans and shutdowns, and Biden’s outrageous war on domestic fossil fuels. The latter three are prototypically liberal policy choices. Biden’s antagonism to energy production has been particularly harmful, as it has had a direct effect on the astonishing energy-price increase that is, well, fueling the price problem systemwide. Although the courts have blocked some of his moves, Biden has acted to suspend energy leases on federal lands and waters, stop production efforts in the Alaska National Wildlife Refuge, kill the Keystone Pipeline, and more heavily enforce burdensome regulations on almost all aspects of domestic development.
While it will take quite some time for inflation to abate no matter what policymakers do, the inflation-blocking process should begin immediately, with the following simple steps.
First, the Federal Reserve should immediately stop its asset purchases, rather than “phase them out” as currently planned. Second, the Fed should raise the funds rate immediately, not by a series of quarter-point hikes but up to 1.5% (also historically low) in one fell swoop. It would simultaneously reassure the market that it does not intend to raise rates again any time soon and thus that there will be no slow-drip of rate-raising torture. This would slow the inflation train without instilling uncertainty in a market fearing a rate-hike escalator.
Elected officials, meanwhile, can stop exacerbating the problem. Lawmakers already have approved an astronomical $6.8 trillion in brand-new spending (atop the usual extravagances) in just the 21 months since the pandemic began. Immediately, Biden and Congress should stop trying to add another $4.75 trillion (in real-world measurements) through the exorbitantly wasteful, misnamed the “Build Back Better” plan. Next, Biden should reapprove the Keystone Pipeline and stop all elements of his war on energy. Finally, Biden should drop economically destructive federal mandates related to COVID-19, thus leaving management of those issues to the states.
With those five simple moves, the inflation bear can be lured back toward its cave. The Democrats fed the beast; it’s up to them to tame it.
