Remember ‘It’s the economy, stupid’? Well, guess what? It still is
Political enthusiasts will recall the 1992 Clinton presidential campaign’s watchword: “It’s the economy, stupid!”
Households across the country are concerned with inflation. Consumer prices are at a four-decade high, led by gasoline, which has doubled in price since January 2021. Investment portfolios are slashed in half. Meat, poultry, fish and egg prices are up by more than 14% year over year. Producer price indexes indicate that we can expect further trouble ahead.
Rising costs hurt in and of themselves. In a recent podcast with me, Steve Forbes — economic guru and former Republican primary candidate — zeroed in on an even greater issue. Inflation, Forbes says, is corrosive. It erodes the certainty needed to transact, people to people, business to business, even country to country. An inability to value products and services based on stable prices saps business confidence and engenders outright fear in consumers.
Right on cue after Forbes’ comments, the University of Michigan consumer confidence index underscored the impact of this psychological trauma, plummeting in June to the lowest point in its more than sevendecade history. Retail sales fell month over month in May as skittish shoppers eschewed durable goods, switched to discount brands when available and bought less, with gasoline and food costs taking up a rising share of falling real income.
The ripple effect is plummeting profits for Walmart and Target, $4 billion first-quarter losses for online retailing wunderkind Amazon and stock markets tumbling into bear territory. Moreover, the Federal Reserve Bank of Atlanta’s forecast for second-quarter growth is now sitting at a big, fat zero as of mid-June, following a first-quarter GDP contraction.
The Biden administration is offering blame instead of solutions. Blaming inflation on everyone from Vladimir Putin to the oil industry to congressional Republicans and, incredibly, even the normally left-supporting media, for supposedly “sensationalizing” bad news against him.
According to a recent I&I/TIPP poll, even a majority of Democratic voters aren’t buying the blame game the administration is trying to play.
Is it Putin’s fault? Not according to Federal Reserve Chief Jerome Powell, who testified before Congress that inflation started long before the Russian invasion of Ukraine.
Is it the failure to pass “Build Back Better”? Not likely, as even staunch Democratic economist Lawrence Summers warned in May 2021 that “printing money” and “borrowing on unprecedented scales” risked dollar declines that would be “much more likely to translate themselves into inflation than they were historically.” If passed, Build Back Better would have added to the inflation woes.
Of course, there is the Biden energy policy. In 2018, the United States became the world’s No. 1 oil producer. Then came Biden’s Keystone Kop move shutting down the Keystone Pipeline, closing federal lands to drilling and even siccing the SEC on investors by over-regulating investments in new production. The result was not only in record highs for gas including $6-a-gallon diesel, a hike rapidly washing through to consumer prices.
Biden’s solution? Begging Venezuelan and Saudi dictators for more oil, and writing energy companies demanding they invest in more production.
Blaming anyone and everyone does not make up for bad policy. Inflation is by the government’s out-of-control spending and the need to print more money. Over-bloated, excessive spending government causes inflation. Inflation tanks our ability to transact business and live daily. Ultimately, inflation tanks the economy. Big government and big spending equal high inflation and big problems for all of us.
Who is hurt most by inflation? It’s not the wealthy progressive financier. It’s the construction or food-service worker struggling to get to work on a $5 gallon of gas who’s feeding a family on $4-a-pound chicken and $3 eggs. High inflation is a harsh regressive tax, harming those with less economic wherewithal.
There is no blame or lie that will help reduce the costs of groceries or gasoline. Inflation is eroding confidence and, most importantly, destroying our family budgets. Inflation is a tax. With the November election quickly approaching, remember the anger you feel when filling up your gas tank or at the grocery check-out line.
It is the economy, stupid.