Even before the House passed a nearly $2 trillion social spending bill last week, President Biden had promised that inflation would be a temporary problem. Treasury Secretary Janet Yellen played down inflation concerns, assuring consumers in June that inflation would peak at 3 percent and that the spike would be “transitory.” Biden’s chief of staff, Ron Klain, endorsed a view from a far-left economist that inflation and supply chain issues are “high-class problems.”
I say working families are high-class people — and we know how to do the math. Our budgets show us that the money we earn, even from all the extra hours we’re working because of the government-funded labor shortage, isn’t buying as much.
In October, inflation came in at a 31-year high of 6.2 percent, making it the sixth consecutive month that inflation has been above 5 percent. After that, Fed Chairman Jerome Powell backpedaled on the “transitory” label for inflation, instead acknowledging that inflation is expected to persist.
Families are struggling. Worries on how to pay for groceries, heating and gasoline overshadow the holidays, all while wages are going up — just not fast enough to keep up with the stealth tax that is inflation. Prices are steadily outpacing our wage gains. In my home state of Pennsylvania, for example, despite average hourly earnings increasing by 4.4 percent in August, there was a reduction in real average wages, thanks to inflation.
You read that right: Pennsylvanians are making more money but are getting poorer. And the problem is not just confined to Pennsylvania, U.S. Bureau of Labor Statistics show.
We knew that this spiraling inflation was coming. The infusion of “free money” and economic shutdowns simultaneously fueled a massive worker shortage and a huge, ongoing spike in demand from consumers. With boosted unemployment checks and the largest child tax credit payments in history, the government paid workers to stay home at least until Labor Day. Now, many people apparently don’t want to return to work.
The solution is rooted in basic economics: If we want inflation to go away, we must ease up on federal spending and let the supply side catch up to the demand side of the economy. Yet, Democrats in Washington continue to live in denial and pursue the same failed policies. They rely on their intentions to help, rather than grapple with their policies’ disastrous results.
Now, the Democrats are forging ahead with another massive, hyperpartisan spending bill. They wanted a $6 trillion package and initially settled on $3.5 trillion as a “compromise.” While that cost since has dipped to just under $2 trillion in the version of the Build Back Better Act that the House passed and sent to the Senate on Friday, Democrats and the Republicans who support these compromises have it backward.
None of their tax-and-spend proposals will solve the root causes of price increases and shortages — they will only make them go from bad to worse. If Congress wants to continue devaluing the dollar and making Americans poorer, lawmakers should simply stay the course and do what the White House and Sen. Bernie Sanders (I-Vt.) are calling for — spend trillions of dollars in an already overheated economy.
Biden and his allies in Congress need to stop this destructive spending now. As the struggle to afford food and other basic goods persists, we are unlikely to be forgiving about the damage caused by our government. Inflation and spending, along with education, will dominate the 2022 midterm elections and governors’ races. Then it will be our votes that define “transitory” in lawmakers’ careers.
Jennifer Stefano is executive vice president of the Commonwealth Foundation, Pennsylvania’s free market think tank, and a visiting fellow at the Independent Women’s Forum. Follow her on Twitter at @JenniferStefano.