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On Monday, President Joe Biden assured Americans that the price increases of the past few months are temporary and totally not an ominous sign of persistent inflation. He claimed that his big-government boondoggles will shore up the economy and prevent inflation — even though his profligate spending contributed to the current inflation in the first place.
Biden began his remarks by taking credit for the U.S. economy’s recovery as the COVID-19 pandemic abates. He touted his child tax credit and the “American Rescue Plan,” his trillion-dollar giveaway to Democratic big cities struggling under the weight of enormous pension plans in the name of COVID-19 relief.
Yet Biden also acknowledged the foreboding price increases that raise the specter of unchecked inflation.
“We also know that as our economy has come roaring back, we’ve seen some price increases. Some folks have raised worries that this could be a sign of persistent inflation, but that’s not our view,” Biden insisted.
“Our experts believe the data shows that most of the price increases we’ve seen were expected and are expected to be temporary. Reality is, you can’t flip the global economic light [switch] back on and not expect this to happen,” he added. “As demand returns, there’s going to be global supply chain challenges. We’ve seen that in semiconductors, which are used in automobiles. That global shortage has slowed vehicle production, creating a temporary spike in car prices.”
“That’s a real challenge,” Biden admitted. He pledged that his “administration is doing everything we can to address it. But again, these disruptions are temporary.” He noted that, after a steep increase a few months back, lumber prices have “fallen by more than 50 percent.”
“I want to be clear: my administration understands that if we were to ever experience unchecked inflation over the long term, that would pose a real challenge to our economy. So while we’re confident that isn’t what we’re seeing today, we’re going to remain vigilant about any response that is needed.”
Ironically, Biden then urged Congress to pass more profligate spending bills to double down on the economic strategy that arguably caused much of this inflation in the first place.
“We should be united in one thing, the passage of the bipartisan infrastructure framework, which we shook hands-on,” Biden said, notably omitting the fact that he himself betrayed his own negotiations with Republicans.
The president argued that if America makes “prudent, multi-year investments in better roads, bridges, transit systems, and high-speed internet and a modern, resilient electric grid,” it will break up “the bottlenecks in our economy.”
He further argued that his “American Families Plan” would involve “raising wages without raising prices” by extending “quality affordable childcare, elder care, [and] paid leave.”
“That won’t increase inflation, it will take pressure off of inflation, give a boost to our workforce, which leads to lower prices in the years ahead,” Biden claimed. “So, if your primary concern right now is inflation, you should be even more enthusiastic about this plan.”
The president also made time for a dig at the Trump tax cuts.
“What we can’t do is go back to the same old trickle-down theories that gave us nearly 2 trillion dollars in deficit-financed corporate tax giveaways that did nothing to make our economy more productive or resilient,” Biden argued. Then he made a rather nonsensical statement: “The same people who cheered on that approach are now telling us it isn’t a problem if big companies have actually to compete for workers and offer them a fair wage with some dignity. I could not disagree more.” (Was he even listening to himself?)
Biden also claimed, “We’re going to pay for [these programs] responsibly, as well, ensuring that our largest corporations, the wealthiest among us, pay their fair share.” He also championed the minimum global tax, a plan to prevent offshoring and international tax havens.
While the president made his remarks as boring as possible — listening to this speech makes the viewer’s eyes droop — the upshot of his remarks is extremely startling and worrisome.
Essentially, Biden said that Americans don’t have to worry about inflation caused by an explosive growth in debt-financed by central banks because… he’s going to expand America’s debt through more financing! Don’t worry, the social programs will pay for themselves and fix the problems they create, or something.
While the Federal Reserve has downplayed the threat of inflation, economists at Deutsche Bank sounded the alarm, warning that Biden’s economic policies seem based on an irrational belief in a Goldilocks economy.
“The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt-financed largely by central banks is likely to lead to higher inflation,” Deutsche Bank economists warned. “We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low-interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam roller.”
The Core Consumer Price Index (CPI) for all items rose 5.4 percent for the 12 months ending in June 2021. It has increased every month since January when the 12-month change had been 1.4 percent. The index for all items minus food and energy rose 4.5 percent over the last 12 months, the largest 12-month increase since the period ending November 1991. The energy index rose a whopping 24.5 percent over the last 12 months, and used car prices increased 45.2 percent in annual terms.
Consumer expectations for inflation over the coming year reached the highest level ever, according to a survey by the Federal Reserve Bank of New York. An American Action Network poll found that 86 percent of Americans said they are concerned about rising prices and that 75 percent of them are worried that Democrat spending proposals could cause inflation.
Meanwhile, unemployment remained at 5.9 percent in June. This persistent unemployment should not surprise Americans who are familiar with the Democrats’ $1.9 trillion blue pork bill masquerading as a “COVID-19 relief” stimulus. Only 8.6 percent of the funding went directly to combat the pandemic, while hundreds of billions went to blue-state bailouts. The bill also sent $1,400 checks to individuals and extended the $400/week “enhanced” unemployment benefits.
Thanks to this “enhanced” unemployment, many workers make more money without a job than they did when they had one. Rather than reconsidering this perverse incentive not to work, Biden and his fellow Democrats further entrenched it.
Biden’s other policies would also make the economic situation worse. The president has called for Congress to spend trillions more in social programs that his tax plans cannot hope to fund. Essentially printing money decreases trust in the U.S. dollar and sparks inflation.
Biden’s “investments” may help some parts of the economy (while creating unintended consequences, as all government programs do), but his profligate spending without adequate financing will make inflation worse. He cannot wave away this issue as if more government money will solve the problem. Government money is, in fact, one of the key reasons the problem exists in the first place.