The good news is, federal policymakers know what spurred inflation to its historic gallop over the last year. The bad news is, it was them.
That’s why Congress and President Biden spent 2021 ignoring inflation or insisting it was merely "transitory." It’s not. The four-decade high 7% inflation rate Americans endured last year jumped to 7.9% in February and seems headed even higher. Contrary to Democrats’ misdirection, this inflation wasn’t caused by COVID-19, but by the federal government’s ham-handed responses to it.
Congress has pumped more than $6 trillion in COVID relief into the U.S. economy, while the Fed injected $4.7 trillion into financial markets. Congress authorized almost $2 trillion of this "relief" in 2021, long after most of the country had largely returned to normal, when even progressive economists warned it could trigger inflation. Much of this cash was given to businesses that never closed and households whose wages never fell. Yet the president and his party insisted all their spending was urgently needed.
This tidal wave of spending crashed into a supply strangled by regulations and mandates hurting truckers, shippers and energy producers, while paying millions of Americans not to work and handing our critical infrastructure to unions who block efficiency to squeeze more money from the rest of us.
While American families and factories were left with the bill, what Washington gave with one hand didn’t begin to cover what it took with the other. Under the auspice of "science," government-imposed COVID lockdowns, mandates, school shutdowns, social distancing and travel restrictions ravaged our economy by choking the supply of goods and services without even containing the disease as promised.
Together, Congress, President Biden and the Fed continued to saturate the economy with money – even as demand boomed and government-imposed restrictions were lifted.
We have it in our power to build an economy that serves America’s families and communities.
Then the inflation came.
For all the president’s promises about raising taxes only on the rich, all Americans pay inflation’s "hidden tax" – at the gas pump and checkout counters, in utility bills, rents and car payments. The cost of living in 2021 grew faster than wages, so despite all those trillions we spent in "relief," and despite soaring costs to employers and small businesses, American workers have less purchasing power today than they did a year ago.
Yet even now, amid a national and global inflation crisis, Democrats are still loath to surrender the budgetary and regulatory power that COVID gave them. They came within a hair’s breadth of passing another $1.7 trillion in December and just approved a $1.5 trillion omnibus spending bill.
Congress and the president have an unending appetite for more spending, more regulation and more subsidies to distort and crowd out private investment. Suppressing supply while spurring the Federal Reserve to finance yet more deficit spending threatens to yield even higher prices.
Inflation doesn’t just happen. It is a direct result of overbearing, clumsy, dysfunctional government policies.
We can stop the costly environmental performance art and unleash America’s natural resources, benefiting families, businesses and our national security.
Local governments can help lower housing costs by rolling back stringent zoning restrictions, density limitations and needlessly aggressive environmental regulation. The federal government needs to end the subsidization of government-sponsored enterprises and Federal Reserve mortgage-backed securities purchases that price the middle class out of owning a home.
We can lower the costs of job creation, business formation and family formation through reducing the tax burden and wiping out destructive regulations.
We can lower consumer prices by repealing crony policies like the war on domestic fossil fuels, electric vehicle subsidies, the federal sugar subsidy program, giveaways to Big Labor bosses through Davis-Bacon Act, burdensome shipping regulations, and taxing imports. And we can block more Federal Reserve money printing to finance deficit spending for the next iteration of "Build Back Better."
We have it in our power to build an economy that serves America’s families and communities rather than our politicians and bureaucrats – to control inflation and unleash innovation and growth. But as with school closures, masks and vaccine mandates last year, the only way policymakers will give up their inflationary, COVID-era overlordship of the economy in 2022 is if the American people take it from them.
Kevin Roberts is president of the Heritage Foundation.