President Joe Biden has an inflation problem, or really two or three. The most obvious is that inflation continues to run too hot, the latest read showing a stubborn 2.7% annualized rate, well above the target of the Federal Reserve.
Cumulatively, prices have risen 16% under Biden, three times faster than under President Donald Trump at this point in his administration. So, it’s not surprising Biden’s polling on inflation — at -26% disapproval — far exceeds his depressed overall disapproval rating.
In turn, this jump in prices has produced a painful drop in family purchasing power. Adjusted for inflation, median weekly earnings are unchanged from just before the pandemic–five years ago. No matter how much Biden talks about a strong economy, families aren’t buying it, and this is partly why.
All of which means Biden needs a fall guy, somebody to blame to get the high inflation monkey off his back, but the two usual explanations just point the finger back at Biden. The Keynesian explanation — now seemingly if sadly adopted even by most Republicans — is that Biden’s surge in deficit spending pushed demand well past available supply resulting in rapid price increases. If one accepts this Keynesian explanation, then Biden’s spending sits squarely in the high-inflation blame bulls-eye.
The alternative credible explanation for high inflation is that the Federal Reserve ran a too-loose monetary policy for too long. A quick glance at the money supply (M2) adjusted for inflation shows it soaring 29% from the start of the pandemic through late 2021. That’s enough to make any good monetarist raise a phalanx of red flags.
If one favors the monetary explanation, then the fault lies first with the Federal Reserve, but then it also falls on former President Donald Trump as he appointed Fed Chair Jay Powell and supported this monetary excess to start. But it falls more heavily on Biden as he enthusiastically supported the Fed’s too-loose too-long policy and re-nominated Powell to continue that policy.
Fiscal policy? Totally Biden. Monetary policy? Trump and Biden. Old Joe looks trapped, so he needs a third explanation. Unfortunately for Joe, he turned for help to the queen of silly economics, Massachusetts Sen. Elizabeth Warren. Her answer – greed.
Biden made this same argument in an interview with CNN.
One can understand the greed explanation’s appeal for Biden. His own greed in running the influence-for-hire Biden, Inc., family business means the greed theme is familiar territory. Even so, it’s utter nonsense as an explanation for high inflation.
Of course, all businesses raise prices when it makes sense to do so. Businesses operate to serve their customers, take care of their workers and be good citizens in their communities, but businesses also operate to turn a profit.
Is this new? Is this a revelation? Or some new aspect of the free market system? Were businesses uninterested in turning profits during the Trump Administration? Of course, not.
And this leads us to the truly funny dimension of Biden’s silly greed explanation. Businesses large and small have always pursued profit, have always to some extent been greedy, but Biden argues American businesses became materially greedier during his administration.
Can he point to a policy that would produce such a result? Is it just having a progressive Democrat in the White House that would lead businesses to such behavior?
Does Biden really want to insist businesses have become greedier because of him? If he does, then Biden’s explanation for high inflation is again — Biden.
J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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