DANIEL VAUGHAN: Biden courts Carter’s legacy

The latest inflation report for April confirms what many critics of the Biden administration’s expansive monetary policy have said: it would cause inflation to rise. The top-line number from the Bureau of Labor Statistics (BLS) noted that over the course of the past year, “the all items index increased 4.2 percent.”

That means most items are 4.2% more expensive than a year ago. That’s a rosier picture than reality after you drill down, however.

The BLS report added: “This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008.” That’s the largest inflationary increase over a 12-month period since the middle of the Great Recession, which lasted from the fourth quarter of 2007 to the second quarter of 2009.

The BLS continued: “The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953.” Further, they said, “The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.”

In other words, just about everything is more expensive. In March, the 12-month comparison was 2.6% higher, and in April, that number increased to 4.2%. Ironically, food and energy, the two things everyone is noticing, were not the significant drivers this month. That is despite the fact that the “energy index rose 25.1 percent over the last 12-months, and the food index increased 2.4 percent.”

The word you’re going to hear a lot, both from the Biden administration and Federal Reserve in the coming weeks and months, is “transitory.”

The Federal Reserve believes this inflationary period will be a short one. One top Fed official said that “he believes most of the recent acceleration in prices will prove transitory as the economy works through supply and demand mismatches that emerged during the pandemic.”

There’s some real truth to that. The pandemic decreased demand across a host of sectors while inflating others. People ordered from Amazon more. They used delivery services. In-person stores and events were harmed. There will be a shift in demand, and the data will be noisy during this transition period. 

That’s why I argued previously that we needed to stop any more government spending that the Biden administration is proposing. We know increased government spending will juice demand and push prices higher, making inflation hurt even more. The inflation and jobs reports are reflecting some of the data weirdness we’re experiencing right now. The presumption the economy can handle more spending is based on a belief, not fact. 

When you include the so-called COVID-19 relief bill, which was more Democratic spending spree than an aid package and got no bipartisan support, Biden is proposing an astronomical amount of $6 trillion in new spending by the federal government. Ignoring the apparent debt issues here, juicing the economy with that much spending when inflation is already flashing warning lights and everyone is recovering from a pandemic is rank irresponsibility.

Inflation is here to stay for a while, even if the Federal Reserve is correct on the timing. Officials in the Fed believe that this short-term inflationary period will be short but “may last through 2022.”

As the pandemic taught us, however, when Americans are dealing with a large-scale issue like a pandemic, it felt like March 2020 dragged on forever. Suppose Americans believe a “short-term” inflationary period is another March 2020 again. In that case, there will be political ramifications, especially if the Biden administration tries to ram through more spending.

The pandemic got forced upon us. If the Biden administration ignores the warning lights from the data we have and rams through more spending, inflation will be his decision. Causing or enhancing a disaster is very different from responding to a situation thrust upon you. 

When things like gasoline are up nearly 50% over the last 12 months, that’s not a sustainable pace for most Americans. Especially as the pandemic is receding and everyone is heading back to in-person work environments, whether that’s a restaurant or an office. Commuting is back for a lot of Americans. Expensive gas eats into a budget already getting hit by higher prices on food, housing, and practically every other category. 

Hopefully, this is a brief transitory period, and inflation recedes. No one likes paying higher prices across the board. But this is one of those situations where the actions of the president and Congress on spending have a direct impact on how bad the situation can get. In a few months, we’re going to find out whether or not the Biden administration cares, or they’re too busy fantasizing about being FDR. 

Jimmy Carter is a viable comparison for Biden at the moment, whether he can admit it or not. The picture of the Bidens towering over the Carters could be as prophetic as any picture, where Biden’s legacy dwarfs the failures of Carter. Inflation is real, it is here, and it can worsen by the actions of a president.