Biden approaches economic point of no return

In our crowded media ecosystem, the biggest story of the week is one the White House is hoping you won’t notice. Inflation grew by 5 percent last month, the sharpest increase in 13 years. American families have noticed, with prices of gas, building materials, cars and food shooting upward significantly. Inflation is a scourge with a simple solution, but one the Biden administration feels it cannot afford: cutting spending and money-printing at the Federal Reserve. The latest inflation numbers are a blaring red warning sign that is both valuable and honest — it is the last point in which President Biden can put the brakes on before the specter of 10 percent (or higher) inflation.

This week’s inflation numbers should alarm the White House even more than the lackluster jobs report or the looming crisis on the southern border. Rampant money-printing and spending since the beginning of the pandemic is the direct cause of the COVID-19 panic and one exploited by politicians using the pandemic as a veneer for social engineering writ large. Our economic troubles will only get worse if Biden moves forward with his $6 trillion budget.

Everyday expenses are climbing almost across the board. Chipotle announced that it hiked prices by 4 percent to cover higher employee expenses. That rate tracks with the increase last month in the cost of food at restaurants. The price of used vehicles shot up nearly 30 percent, and airline fares were not far behind. Used car prices are expected to spike even further later this year. Home and rental prices increased, as well — a deceptive figure, considering that in many parts of the country the housing market is seeing an enormous surge in demand while others still lag from the pandemic. While the topline Consumer Price Index numbers are alarming, the “flexible” inflation rate of goods that are more vulnerable to price changes is up 12.4 percent — the highest since the Carter era.

The causes of the current situation remain simple, just as Ronald Reagan and Paul Volcker understood in the early 1980s. The fiscal year 2021 budget deficit is already more than $2 trillion, and it follows last year’s mind-boggling $3.13 trillion budget. Meanwhile, the Federal Reserve is continuing its inflationary policies, with its held assets breaking $8 trillion for the first time. Each of these problems underlines the faults in traditional Keynesian economic approaches. Washington, D.C. has been pumping out printed and borrowed money, while the Fed has kept interest rates artificially low. A rate increase and an end to supplemental coronavirus unemployment bonuses would solve both the unemployment lag and potential new inflation. However, this is politically unfeasible. Democrats show no appetite to give up the radical economic model they previously justified by the pandemic — nor do they seem to view the current lackluster employment and surging inflation numbers as priorities.

The president does not appear to be concerned about the most recent figures. In fact, this week lawmakers came to a tentative deal on a potential $1.2 trillion infrastructure bill. Not only would it further increase the deficit spending, but it will create demand competition for construction goods that are already shooting through the roof. With spending levels higher than World War II, Biden risks the most severe inflationary crisis since the 1970s.

This will be Joe Biden’s make or break year. He will either get the federal budget under control to avoid high unemployment and inflation, or plunge the nation into a decade of economic struggles, similar to the Malaise period. So far, the latter seems far more likely. The president’s current trajectory of continuing enhanced unemployment benefits is keeping Americans out of the workforce while goosing inflation. There are currently 9.3 million job openings and 10 million are unemployed. Some states are ending the federally-funded enhanced unemployment program early, but the White House is talking about a federal expiration in September. By that point, many workers will have been out of their jobs for a year and a half. This is not to mention that increased federal unemployment money will likely cost more than $1 trillion.

Biden’s apparent plans for a second Great Society would dash any realistic hope of a spending freeze. Just as Lyndon Johnson’s Great Society was a major factor in the 1970s stagflation, the 2020-2021 coronavirus-Biden print-tax-and-spend period likely will be a cautionary tale for future economists and politicians who believe the solution to any societal problem is running the presses overtime. 

While inflation remains mainly a historical curiosity for now, the increasing price of goods and services will get Americans’ attention soon enough. Unfortunately, by then it likely will be too late. Joe Biden is the only politician who served in the Senate through the mistakes of the Carter years — and apparently learned nothing from them.       

Kristin Tate is a libertarian writer and an analyst for Young Americans for Liberty. She is an author whose latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.