Lawmakers should be concerned about October’s 7.7% year-over-year inflation rate, particularly Democratic politicians whose policies have exacerbated the issue. However, it appears that some well-known Democrats are completely unaware of their role in inflation.
Sen. Elizabeth Warren (D-MA) criticized Federal Reserve Chairman Jerome Powell on Meet the Press this month for hiking interest rates to fight inflation. She said that hiking rates would have no effect on rising prices and run the risk of a recession: “The Fed has gone way out on the extreme,” she said, expressing profound concern for the higher expenses to people.
However, if the government hadn’t spent the previous 2.5 years implementing inflationary policies, which were supported by Warren and her fellow Democrats, the Fed wouldn’t be hiking rates at this time so quickly. For instance, the so-called “American Rescue Plan” stimulated the economy with roughly two trillion dollars while the government curtailed supplies through draconian COVID-19 lockdowns and vaccination requirements. Warren apparently doesn’t see a connection.
Democrats have generally been hazy in their explanations for why there has been so high inflation. However, they all concur that the root causes are three: supply chain disruptions brought on by the epidemic, the conflict in Ukraine, and “business price gouging.”
Without a doubt, the epidemic caused significant supply interruptions. It was impossible for businesses to sustain prior levels of productivity when employees were frequently absent with illness and many more were quarantined at home. However, problems with the supply chain weren’t caused solely by the pandemic. Additionally, it was the government’s reaction to the pandemic.
It was the lockdowns, which required “non-essential” firms to close with little to no warning and no guarantees as to when they may be allowed to reopen.
The unemployed may receive increased and extended unemployment benefits for up to an incredible 39 weeks, which encouraged them to stay at home even when they were eligible to resume their job search. While shutting down major portions of the economy, it was also disbursing trillions of dollars in stimulus payments.
Democrats at least acknowledge that market forces have an impact on inflation. They are correct that problems with the supply chain contributed to inflation, but they are completely mistaken when they claim that the demand side has nothing to do with it.
For a complete picture when examining price changes, you must consider both supply and demand. Through lockdowns limiting supply, the government was actively attempting to increase demand with relief checks, improved unemployment benefits, and cheap interest rates — all measures that received the enthusiastic backing of Democrats.
Of fact, maintaining the level of demand rather than increasing it was the proclaimed objective of government expenditure. But because demand was intentionally kept high and supply was severely restrained, inflationary pressure resulted.
Undoubtedly, the war in Ukraine also contributed to global inflation. However, as many have noted, inflation began to rise before Russia invaded Ukraine, so it is unlikely to be the major factor that Democrats seem to believe it to be.
Furthermore, one cannot attribute inflation to some nebulous, immeasurable rise in “business greed.” Even though inflation was only 2%, businesses were still avaricious. There hasn’t been a shift that would account for the enormous inflation rates we’re witnessing. Democrats utilize the idea of corporate greed as a handy scapegoat so they don’t have to take responsibility for the inflationary policies they’ve been pushing for the past two and a half years.