The writer is the Times' senior econ correspondent.
From the NYT, November 16:
The Morning Newsletter
Who’s to Blame for Rising Prices
Why do so many things seem to cost more now?
The rising prices of food, gas and other things we buy — in other words, inflation — were already a central economic issue of 2021. Those prices are up 6.2 percent over the last year, and shortages and other inconveniences are side effects of the problem.
Now inflation is also a central political issue. It is dragging down President Biden’s approval ratings and fueling discontent among Americans. It’s clear in surveys. It will surely be the talk at the table of Thanksgiving family gatherings next week (even if, as an economics writer, I might prefer to skip one day of talking about supply chain mechanics).
How did we get here? Who is to blame? To help you understand, today I’ll walk you through the most obvious candidates — and where the evidence looks strongest.
President Biden
Presidents have less control over the economy than headlines might suggest, but the current situation is an exception to the rule. You can draw a direct line from a specific policy decision that Biden and congressional Democrats made this past winter to some of the inflation happening now.In designing the stimulus that Congress passed in March, Biden’s administration went big, with $1.9 trillion in pandemic relief — on top of a separate $900 billion package that passed three months earlier. Put the two together, and $2.8 trillion in federal money has been coursing through the economy this year while economic activity has trended only a few hundred billion dollars a year short of what mainstream analysts would consider full health.
If you think of inflation as a result of too much money chasing too few goods, then this extra spending is most likely a culprit.
But for all the trillions spent, Americans’ purchases through the end of September were only about $52 billion higher — or 0.4 percent — than would have been expected in a world where the pandemic never happened. I take that as evidence that most of the spending served to replace lost incomes (from people not working, voluntarily or otherwise) or was plowed into savings, and the inflation story is more complicated than just too much money floating around.
The Fed
The nation’s central bank has kept ultra-easy monetary policy in place for far longer than in past economic cycles. Its chair, Jerome Powell, has focused on returning the job market to full health and has projected that the inflation surge is temporary.
His response in large part took from the lessons of the last economic expansion, when the Fed started raising interest rates at the end of 2015 and, with hindsight, might have excessively crimped a recovery that was only starting to show big benefits to workers....
From there it devolves into sounding a bit like George Baily in the bank run scene from "It's a Wonderful Life" i.e. Who's to blame? It's all of us, all of us together:
"You’re─ you’re thinking of this place all wrong, as if I had the money back in a safe. Why, your money’s in Joe’s house. That’s right next to yours, and then the Kennedy house and Mrs. Maiklan’s house, and a hundred others!"
My point is, there seems to have been a major shift in how the Times writes about the political aspect of the economy. Prices started seriously ticking up in January but even by May there was no way you'd have seen the bolded paragraph. Here's the Producer Price Index (PPI) via Trading Economics (also on blogroll at right)
source: tradingeconomics.com
Next, the Times' Paul Krugman: "I got inflation wrong."
Something's up.
