Kudlow: This is the 'root cause' of inflation

Ending inflation is not hard, it's common sense

Save America, kill inflation. Why? Because the 7.5% inflation tax is destroying working folks' pocketbooks and devaluing the wages they earn and the root cause of the inflation is way too much government spending, too many social programs without workfare, and vastly too much money creation by the Federal Reserve. 

It's not hard, just common sense. Those three factors: Too much spending, too many incentives not to work and produce, and too much money creation. That latter point on the Fed is probably the biggest factor of all. Now, we had an interesting inflation analysis this weekend from House Speaker Nancy Pelosi. On one of the Sunday shows she said sky-rocking inflation is due to more people entering the workforce. Really? 

I quote: "The fact that people have jobs always contributes to an increase in inflation. And that's a good thing," Pelosi said, "but inflation is not good, you know, we have to contain it." 


(Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)

Speaker of the House Nancy Pelosi, D-Calif., conducts her weekly news conference in the Capitol Visitor Center on Friday, August 6, 2021.  ((Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images) / Getty Images)

So, madam speaker, you can't have it both ways. Either you blame working people, or you don't. Some big liberal on your staff probably told you there is a Philips curve trade-off between high inflation and low unemployment, but that person misled you and confused you. 

More people working is unambiguously good for America and more people working never causes inflation. Inflation is too much money chasing too few goods. The more people who work means more people are producing goods. 

Speaker of the House Nancy Pelosi of Calif., speaks during a news conference on Capitol Hill, Thursday, Feb. 3, 2022, in Washington.

Speaker of the House Nancy Pelosi of Calif., speaks during a news conference on Capitol Hill, Thursday, Feb. 3, 2022, in Washington. (AP Photo/Evan Vucci / AP Newsroom)

That's the supply side of the economy and more goods chasing the same amount of money would reduce prices and lower inflation. Right now, working folks are demanding higher wages because they're trying to keep up with higher prices. It’s a price-wage spiral and who can blame them? 

Then, later, Ms. Pelosi said, that one of President Biden's great accomplishments is the rescue package from last April that has put money in people's pockets. Now that's not an achievement, it was a failure. It caused high inflation because it created too much demand. 

Even worse because it's government income without work requirements and created more demand and less supply at the same time, and that is in fact one of the principal causes of the raging inflation we have now. 


So, I'll repeat: Wanna solve inflation? Pause spending, reform welfare and curtail the Fed's money supply. 

This, by the way, was the key part of a memo that the very brilliant former senator Phil Gramm recently sent to a bunch of his friends in the House and Senate. I don't think Madam Pelosi got the memo. That's my riff. 

This article is adapted from Larry Kudlow's opening commentary on the February 14, 2022, edition of "Kudlow."