I hate to say I told you so, but when it comes to spending and inflation, pretty much all of us on the Right told everybody so.
And it’s all the fault of Presidentish Joe Biden and congressional Democrats.
Let me show you a little chart from finance site In2013Dollars.
I’ve annotated it in red.
In February, House Democrats passed the $1.9 trillion-with-a-T “stimulus” bill without a single Republican vote.
One week later, Senate Democrats gave the bill their blessing — again without a single Republican vote — and sent the legislation to the White House for Biden’s signature.
The week after that, Biden signed the so-called “American Rescue Plan” into law. The first $1,400 stimulus checks began arriving electronically in Americans’ bank accounts within days.
Also included were extended unemployment benefits, health insurance subsidies, cash payments for parents of minor children, and bailouts for “schools, restaurants, pensions, homeowners, renters, farmers and funerals.”
“Inflation,” as Milton Friedman taught us, “is always and everywhere a monetary phenomenon.”
What that means is, inflation happens when the government prints more money without a commensurate increase in productivity. More dollars chasing the same number of goods and services causes prices to rise. Workers have to ask for raises just to stay even, and the value of their savings goes down. Investors looking for hedges against inflation will take their money out of productive investments, just when the economy needs productivity to increase the most.
In short, everything sucks.
But “everything sucks” is not bad enough for Biden and his overly-ambitious congressional Democrats.
Inflation is bad enough when productivity remains the same. But Democrats have crushed American productivity since they took charge. They’re strangling U.S. oil production, doing nothing to undo the growing logistical crisis, smothering small businesses, webs of new regulations, etc. As a result, despite Democrats’ crowing about record growth, the U.S. economy is still short 4.2 million jobs from the pre-pandemic high.
What happens when Washington prints trillions we don’t have while also pressing its boot on the throat of American productivity is this: more dollars chasing fewer goods and services.
Some call it Bidenflation.
Let me show you what Bidenflation looks like.
Unless something changes in December — ha! — inflation for 2021 will break somewhere a bit north of 5%.
The median U.S. household income was $67,521 in 2020. If 5% inflation continues for the four years (?) of the Biden Administration, at the end of 2024, the average American household will have to take in $82,072… just to stay even.
Four years of raises worth more than 20%, except they would be worth nothing after Bidenflation.
This is already happening.
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As I reported to you last month:
The Labor Department reported Friday that average hourly earnings increased 0.4% in October, about in line with estimates. That was the good news.
However, the department reported Wednesday that top-line inflation for the month increased 0.9%, far more than what had been expected. That was the bad news – very bad news, in fact.
Americans got a nice raise in October, yet we were still poorer.
In November, inflation hit 6.8% from the year before — a number not seen in 39 years.
We were poorer in October than we were in September, and we were poorer in November than we were in October.
We will be poorer in December than we were in November.
Anyone else spotting a trend here?
I really did warn you, too, all the way back in May, months before the worst of Bidenflation took hold.
Here’s a flashback to my Insanity Wrap from May 26:
Here’s a Twitter thread from New York Times business and economics writer Binyamin Appelbaum, explaining that inflation is pretty nice, akshully.
Savings wiped out? Can’t afford to eat red meat anymore? Staying home because it costs too much to fill the tank? The economy comes to a screeching halt as interest rates skyrocket? Your neighbor is unemployed and so are you?
Insanity Wrap leads with this story for just one reason.
If a New York Times writer is getting ahead of the curve, explaining away 1970s-style inflation that we aren’t actually experiencing, it’s because 1970s-style inflation is probably just down the road.
Inflation, once set loose, is impossible to contain without doing things that hurt.
The Federal Reserve has to raise interest rates sharply — remember the 20% Fed funds rate under Fed Chair Paul Volcker in 1980? That was to combat 10% inflation and it wasn’t so good, akshully.
And you have to keep pumping rates painfully high until the economy has choked hard enough that, like the Heimlich maneuver, it spits the inflation out.
Politically, though, high interest rates can be suicide. At the risk of his own, brand-new administration, President Reagan gave Volcker the political cover to keep up the pressure until the Nixon-Carter inflation was wrung out.
Ending inflation today would also require Washington Democrats to stop printing money to pay for their progressive programs.
Do you see either of those things happening so long as the near-empty husk that was once Joe Biden still serves, such as he does, as POTUS?
Of course not. Democrats just spent another $1.9 trillion (mostly in funny money) on an “infrastructure” bill that’s not even 10% infrastructure, and are hellbent on spending another few trillion on Build Back Bolshevik.
If there’s a lesson in all this, it’s don’t let “progressive” Democrats win (or steal) elections.
But you knew that, didn’t you?
America is about to re-learn a whole lot of painful lessons that I, in my innocence, thought we’d learned 40 years ago.