From Compact Magazine:
President Biden is hanging on to Vladimir Putin for dear life. Earlier this month, he estimated that Vlad the Invader was responsible for 70 percent of the latest wave of inflation to roll over the United States. Back in December, the administration blamed “the greed of meat conglomerates” for Americans’ waning purchasing power. In November, it was the “anti-consumer behavior” of two oil companies. Annual inflation is 8.5 percent now, the highest rate since 1981, when Ronald Reagan replaced Jimmy Carter. Annual wage growth is 5.6 percent. The average American is losing ground.
Allegations of Russian culpability are unconvincing. Inflation was already 8 percent when Biden announced he would ban the import of Russian oil and gas. Yes, gas prices have risen to an average of $4.17 a gallon, a 15 percent hike since February’s invasion. But they were already at $3.62 when the tanks started rolling—up 47 percent from the $2.46 Americans were paying when Biden assumed the presidency. Certainly, America isn’t the only country affected by the Ukrainian unpleasantness. There has been a flambée of inflation in France and an Anstieg in Germany, the latter dependent on Russia for a third of its oil and half its gas—yet inflation is higher here than there.
The case that Biden is to blame is close to airtight. Inflation was at 1.7 percent when he came to office. The country was poised for a boom, with unemployment at 6.4 percent and falling rapidly. Biden’s proposal to turbocharge the economy with his $1.9 trillion American Rescue Plan (ARPA) raised alarms. In recessions and depressions, stimulus is supposed to fill an “output gap.” If struggling Business A can’t pay otherwise healthy Business B, Business B might go bankrupt, leaving Businesses C, D, and E unpaid and creating an avoidable contagion. Usually, policymakers are cautious about using stimulus. Progressive economists, for instance, often say that Barack Obama’s $900 billion stimulus didn’t cover the whole output gap of the 2009 finance crisis. True. But that doesn’t mean they are right when they say the stimulus was “too small.”
“The Biden stimulus was wildly out of line with anything his predecessors had tried.”
The Biden stimulus was wildly out of line with anything his predecessors had tried. The macroeconomist Olivier Blanchard, who led the International Monetary Fund during the Obama years, tweeted that Biden’s ARPA stimulus, on top of Trump’s, would add “four times the upper bound on the output gap.” Clinton Treasury Secretary Larry Summers warned that the stimulus would be “on a scale closer to World War II levels than normal recession levels” and that it would “set off inflation pressures of a kind we have not seen in a generation.” Summers hearkened back to what he called the “guns and butter collision,” Lyndon Johnson’s attempt to wage both a military war in Vietnam and a “war on poverty” in America’s ghettos without raising taxes. The excesses involved were on the order of 1-2 percent of GDP, sufficient to stoke inflationary pressures that the Federal Reserve would still be fighting in the 1980s, a decade after LBJ’s death. Blanchard was incredulous: “If this increase in demand could be accommodated, it would lead to a level of output at 14 percent above potential,” he wrote. “This would not be overheating; it would be starting a fire.”....*****.....“Inflation has always signaled a deficit of legitimacy.”Inflation has always signaled a deficit of legitimacy. It arises when the government has an agenda it cannot declare. Wars, for instance, are notoriously inflationary. It is hard enough to levy taxes for uncontroversial projects, hopeless to do so if the project you are proposing endangers the lives of taxpayers’ children. For Hirsch and Goldthorpe, the ’70s inflation reflected the transition from a traditional to a purely capitalist society. Old habits of deference, which had provided the “normative camouflage” for the status quo, no longer bound working men. Laborers were now ready to do battle against ownership. The conflicts were hard to resolve, because the two sides were arguing from irreconcilable bases of legitimacy. The insurgents were too strong to resist, but the incumbents were too strong to expropriate. Inflation allowed each side to leave the bargaining table claiming (and for a while even believing) that it had done better than it actually had. Inflation was, Goldthorpe wrote, “the monetary expression of distributional conflict.”....
....MUCH MORE
As noted (and quoted) in the introduction to a February 2022 post:
Another Rent Survey With Numbers That Aren't Showing Up In The Shelter Component Of The CPIIt's probably time to start framing this stuff in terms of war on the middle and working classes, in line with our new favorite comment on politics and policy:
—Franklin D. Roosevelt
