EDITORIAL: Inflation | Years of policy choices fuel the flames
Nov. 18—Jerome Powell, the chairman of the Federal Reserve, knows far more about the "dismal science" of economics and the specific details of the American economy than we do. And he continues to insist that the inflation buffeting the American public is temporary.
We hope he's correct. But we also know that today's inflation follows years of inflationary government policies under three different presidents — some of which were necessary responses to crippling blows to the economy, and some of which were not.
Barack Obama took office in January 2009, soon after the financial markets cratered. The federal deficit rose from $459 billion in calendar 2008 to over $1.4 trillion in calendar 2009 as the government correctly tried to right the ship. After that, deficits receded to roughly the level preceding the Great Recession, and the U.S. economy grew at a slow but steady clip.
Donald Trump took office with that slowly rising economy and sought for four years to goose growth. There was a massive tax cut with no corresponding reduction in spending. Federal deficits rose accordingly. The national debt — the total of the annual deficits — rose almost $7.8 trillion during his four years in office. That's inflationary.
But that was not the end of the inflationary policies he pursued. His immigration restrictions had the effect of constricting growth in the labor market, creating shortages of workers in agriculture and other fields. That's inflationary.
Raising tariffs, which Trump did repeatedly, was inflationary also, artificially raising the cost of goods coming to this nation from other countries. Trump never seemed to grasp that it wasn't China or Mexico or the European Union paying those tariffs; it was the American consumer.
And, of course, the pandemic, like the financial collapse, created an economic crisis. Congress has passed, and two presidents have signed, repeated stimulus packages of increasing size intended to keep the economy afloat. Those stimulus measures were necessary. They were also inflationary.
Not every aspect of today's inflation is the result of government policy. It was not the federal government that outsourced industrial production overseas, and there is no obvious federal policy keeping container ships bearing those goods backlogged at U.S. ports. These are major factors in the supply chain snags that have created shortages and raised costs.
But behind the rising prices consumers confront on a daily basis is at least five years, arguably more, of consistently inflationary public policy. Sooner or later, inflation was bound to emerge. The wonder is that it took so long to do so. President Joe Biden, Congress and the Fed all should recognize that.
