Mulvaney: How Biden’s regulations are driving up inflation

For the first time in a long time, talk about inflation has made its way to the kitchen tables of America. For decades, monthly inflation numbers were mostly fodder for CNBC and Bloomberg addicts. Today, it seems that ordinary Americans are also paying attention.

That is as it should be, as inflation hits “normal” American in very real ways.

With inflation having been under control for most of the last 40 years, there are entire generations who don’t really know that much about it. They aren’t sure what causes it, nor are they familiar with ways to fix it.

Which brings us to a teachable moment.

Inflation can be understood, in its simplest form, as “too much money chasing too few goods.” If people get more money, but the supply of things they want to buy doesn’t increase, then the price of those things goes up. Similarly, even if people have the same amount of money, but the supply of things they want to buy goes down, the price of those things also goes up.

That works the other way as well: Prices can go down if incomes stay the same but the supply of goods goes up, or if incomes go down while the supply of goods stays the same.

We spend a lot of time in this country focusing on the demand side of that equation — the amount of money floating around. Hence the role of government spending on inflation. But I want to talk a little bit about the supply side. 

And I want to talk about it in terms of how regulation in general, and specific Biden policies in particular, can affect the supply of goods, and thus the price of those goods. There is no shortage of new proposed regulations coming out of this administration. So, we don’t have to look very far. 

For example, last week the Office of Management and Budget blessed a proposed new rule from the Environmental Protection Agency regarding so-called “forever chemicals,” also known as PFAS. The proposal was that we set the acceptable limit for those chemicals in drinking water at 4 parts per trillion (ppt).

To put that in perspective, by the way, the limit in drinking water for arsenic is 10,000 ppt. For lead it is 15,000 ppt. The limit for cyanide is 200,000 ppt.

Now, never mind that current technology can barely measure levels as low as 4 ppt. And never mind that there is little if any credible science that supports setting a standard at 4 ppt (as PFAS exposure usually comes from places other than drinking water). And never mind that limits in other countries are much, much higher than what the EPA is proposing.

Those are all good debates for another day on whether or not this rule makes any sense at all. But the bottom line when it comes to inflation is that this rule will raise the costs of pretty much everything in your home.  

To put it in inflation language, it will either make goods more expensive, or reduce their available supply, or both. And unless incomes go up at the same time, the end result will be a loss of purchasing power.

One study has indicated the cost of this new rule could raise your cost of water by more than $3,000 per year. And that doesn’t consider the impact on the literally thousands of products — medical devices, cars, computer chips — that use these chemicals.

Indeed, it’s a pretty good example of the straight line between more regulation and a higher cost of living.

You hear the Biden administration blame a lot of outside forces for inflation —  “Putin’s Price Hike” and “corporate greed,” among others. But inflation is a pretty simple balancing act between the money you have to spend, and the goods and services you want to buy. Every time Biden’s administration adds another regulation making it harder or more expensive, to bring those goods and services to market, the more prices rise.

The sad part is that the supply side is really where government policy could help bring inflation under control. The administration, for example, could seek to cut regulation, making it easier, faster and cheaper to get products to consumers. They might, for example, require that government find old regulations to take off the books before we put new ones on. They might require real cost-benefit analyses before saddling us with more expensive rules and regulations.  

That might allow us to have a strong, growing economy, where people are making more money without losing its value to inflation.

But of course, The Biden administration would never do those things. Because that is exactly what the Trump administration did.

Mick Mulvaney, a former congressman from South Carolina, is a contributor to NewsNation. He served as director of the Office of Management and Budget, acting director of the Consumer Financial Protection Bureau and White House chief of staff under President Donald Trump.