So reads the title of Nick Gillespie’s column at Reason Magazine, which says that “Too many (government) dollars are chasing too few goods,” thanks to Biden’s harmful policies:
The Consumer Price Index (CPI) tracks the cost of everyday items. It’s jacked up a whopping 6.8 percent over the past year, the biggest increase in almost 40 years. Gas is up 51 percent, beef is up 20 percent, and furniture by 11 percent….Biden, his advisers, and his champions in the press are … downplaying inflation or bizarrely claiming it only freaks out rich people….Even worse, Biden and crew are delusionally pronouncing that we can tame inflation by pumping massive amounts of government money into the economy—a course of action that will almost certainly make everything more expensive. What Ford, Biden, Warren, and Yellen have in common is a failure to understand inflation’s most important underlying cause…
We’ve seen absolutely massive increases in government spending over the past two years, which have been paid for by printing money and historic boosts in the money supply. When you print money it means that there are more dollars chasing basically the same amounts of goods and services, which causes prices to rise. In just the past three fiscal years, federal spending has swollen to nearly $7 trillion a year, up from about $4.4 trillion in fiscal year 2019. Spending was $6.6 trillion in 2020, and $6.8 trillion in 2021.
As the government borrows more to pay for its spending and the Fed creates money to buy that debt, the central bank’s balance sheet has more than doubled between March 2020 to November 2021. The result is that the supply of dollars has increased by nearly 40 percent over the past 2 years, which is an off-the-charts record. Short of going into recession, the traditional way to squeeze out inflation has been to raise interest rates and restrict the amount of money in circulation by raising taxes or cutting spending. But there’s simply no reason to believe that Biden or anyone else in Washington is committed to the sort of fiscal and monetary discipline that would tame inflation. In fact, the president’s infrastructure bill jacks up the very entitlement spending that is the major driver of long-term spending….Another thing that’s changed over the past 40 years is that the publicly held debt has more than quintupled as a share of gross domestic product. In 2022, the Congressional Budget Office predicts that interest payments on the debt will be 5.7 percent of total spending, more than doubling to 11.6 percent by 2031. And that’s assuming interest rates stay low. Squeezing inflation out of the economy by hiking interest rates is never a popular political stance. Since it will absolutely devastate the government’s balance sheet, it will be even harder now.
If Biden manages to pass his proposed Build Back Better Act, that will make things even worse. Economists say “Build Back Better” would worsen already soaring inflation, notes J.D. Tuccille. He points out that its “trillions of dollars in taxes and spending hikes” may be scaled back somewhat due to the worries of Sen. Joe Manchin (D-W.Va.). He is concerned about the “‘Build Back Better’ bill’s near-certain escalation of already worrisome federal debt and inflation…as prices have risen across the board for Americans.” Manchin says he “won’t support a multitrillion-dollar bill without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on our economy and existing government programs.”
As Tuccille observes, “inflation has hit” the “highest level since 1982,” and “the Congressional Budget Office (CBO) estimated that the Build Back Better bill ‘would result in a net increase in the deficit totaling $367 billion over the 2022-2031 period’ [even] under unrealistic congressional assurances that its policies would be temporary. In the more likely case that the extra spending becomes permanent, it ‘would increase the deficit by $3.0 trillion over the 2022–2031 period,’ says the CBO.”
In response, Manchin “intensified his criticisms about inflation” and the risks of passing the Build Back Better bill without scaling back its spending levels, the Washington Post reported.
Many economists have said Build Back Better will increase the inflation rate. “In our assessment, the very front-loaded and relatively progressive nature of Build Back Better means that it is more likely to be inflationary,” the Committee for a Responsible Federal Budget cautioned earlier this month; “it carries undesirable risks of contributing to a possible inflationary spiral in a time of already high inflation.”
Tracy Miller, a George Mason University researcher, agreed about the dangers of money created out of thin air to fund Biden’s Build Back Better plan. “We’re already experiencing the highest rates of inflation in 30 years, and it can be blamed on the expansion of the money supply since the beginning of the pandemic,” Miller said. He warned that the Build Back Better bill’s reliance on debt funded with money created by the Federal Reserve threatens more rapid inflation.
In a video discussion on rising government debt, economist John Cochrane says a nation can only get away with running budget deficits if it keeps that red ink within limits as a fraction of a growing economy. That would no longer be the case under Biden’s plans: America’s national debt is more than 120 percent of GDP and the government plans to keep spending much more than it takes in. “The U.S. situation is an intractably exploding debt-to-GDP ratio. Steady large deficits,” he says.
