Stephen Green predicts
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I won’t pretend to know anything about economics beyond Econ 101, but it strikes me that Green has some solid common sense behind his argument. Where we disagree is his laying the blame solely on Democrats; for the most part, Republicans are indistinguishable from Democrats when it comes to profligate spending — witness their behavior when they had control of the Senate and the House during the Tea Party days —and merely used the Democrat’s undefeatable majority this year as cover for the “recovery” plans.
So Green’s argument that Republicans can right the ship when (if) they regain power is suspect, in my opinion. The “hard medicine” Volker used to wring inflation out of the economy will never be tolerated again, regardless of which party is in control. Medicare is due to go bust in 2026, and Social Security in 2033 (? sometime around then). Will we see spending cut from some other entitlement programs cut or eliminated to pay for refunding these two? When pigs fly.
All that said, here’s Green:
BY STEPHEN GREEN DEC 10, 2021 1:34 PM ET
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 [inflation rate] 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. ….
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.
….
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.
It worked.
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?
SNL Had their number back in 1978, when the show was still funny (and willing to take on Democrats)
