Larry Kudlow: Solving inflation won't be easy
A recent poll shows many people wish to cut government spending
"Inflation is taxation without legislation"—that quote according to the great Nobel Prize winning Milton Friedman many years ago.
Milton also said, "Inflation is the cruelest tax of all." So, we're getting taxed to death with a 7% CPI after Joe Biden's first year. Donald Trump left him below 2%. Trump, of course, was a tax-cutter, yielding great prosperity.
Biden is a tax-hiker, generating both inflation and stagnation.
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Inflation is public enemy number one, even though the president yesterday called our Peter Doocy a "stupid S-O-B'" for asking a question on inflation, which, by the way, was on topic because Biden had just come from an internal inflation discussion, but Biden's inflation discussion is about attacking business, not inflation.
Inflation is a monetary phenomenon.
In the past year, the basic cause of the inflation spike is far too much federal spending in pursuit of big-government socialism that is enabled, or financed, by Federal Reserve money printing.
The Bidens' left-wing approach to life always blames business for price gouging or collusion. In "Biden World," businesses love to get together and inflict damage on their customers, really hose them over with high prices.
Now, the thought that consumers would boycott high prices in a competitive marketplace never occurred to the Bidens because no one in his administration has ever worked in business.
Take meat and poultry—the same big four companies have dominated for three decades, but without inflation.
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Take technology—dominant companies in social media or telecoms or semiconductors or computers, or software, have been dominant for years and years and prices have crashed and if techies get out of line, new companies spring up and blow them out of the water because that's what consumers want: good quality and low prices.
In "Woke World," college professors tell students what they can and cannot do. In the business world, consumers tell companies what they can and cannot do, but when the Federal Reserve drops tens of trillions of gallons of money from helicopters in the sky, now that's a little different because then everyone raises prices.
Consumers have more money. Businesses have more money. There's no restraint or discipline whatsoever.
A recent TIPPs poll from my pal, Raghavan Mayur asks, "What can the government do to reduce inflation?'"
The leading response by far was "cut government spending: 42%."
Unfortunately, second: 31% want to impose price controls. That's a very bad idea.
Third, and more promising: 24% want to reduce tax rates on businesses. Very good.
Fourth, at 23%, is reverse regulations. Excellent.
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Fifth, at 19%, Federal Reserve should stop printing money.
So, people are pretty smart. They get it. Joe Biden doesn't. What else is new? And by the way, on the Biden attack, not one single piece of evidence with respect to price gouging or oligopolistic collusion, or for that matter consumer harm has been proven.
They make wild charges like Senator Elizabeth Warren does all the time with absolutely no proof.
Now, to solve this inflation problem is not going to be easy. Big government socialist spending bills must be defeated and the Fed is going to have to slam on the break and withdraw excess money from the financial system. There is no other way out.
To quote former Fed chair, William McChesney Martin about 50 years ago, "It's time to take away the punch bowl."
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When he said that, LBJ hated it and yelled at him. When Paul Volcker told Ronald Reagan it was time to remove the inflation bowl, the Gipper said, "Go right ahead" and Reagan slashed taxes to rejuvenate the economy while Volcker restored the value of our money to vanquish inflation.
Here's my concern right now: Powell is no Volcker and Biden is no Reagan and whatever adjustments take place in the next couple of years, it is not going to be economically pain-free.
Save America. Kill the bill.
This article is adapted from Larry Kudlow's opening commentary on the January 25, 2022, edition of "Kudlow."