The Biden administration’s changing takes on inflation

Back in July, President Biden said that “no serious economist” was worried about “unchecked inflation.” In October, with inflation still stubbornly high and rising, White House Press Secretary Jen Psaki said that inflation was, in fact, a “good thing” because it showed the strength of the economy’s recovery from COVID-19.

That same month, the Bureau of Labor Statistics reported that prices were up 6.2 percent in the year to October — “the largest 12-month increase since the period ending November 1990.” Consumer prices in the United States are up by 7.5 percent over two years, more than two percentage points higher than anywhere else in the G7. These prices increases are hitting people on lower incomes hardest and wiping out wage gains.

So, in November, the Biden administration had to change tack once more. Inflation went from being a “good thing” to being a conspiracy hatched by greedy corporations. President Biden “asked the FTC to consider whether potentially illegal and anti-competitive behavior in the oil and gas industry is causing higher prices for consumers, so we can assure the American people are paying a fair price for the gasoline.” The Federal Trade Commission is also being sent after Walmart, Amazon, Kroger, other large wholesalers and suppliers including Procter & Gamble Co., Tyson Foods, and Kraft Heinz Co. “to turn over information to help study causes of empty shelves and sky-high prices.”

This is about the most idiotic explanation for inflation that there is (to nobody’s surprise, Senator Elizabeth Warren eagerly embraced it). Why, one wonders, have business people suddenly become so much greedier than they were just a few months ago? When inflation slows, is that a sign that business people have got less greedy?

To ask the question is to see what an empty theory it is. In truth, as I’ve written before, inflation comes from the amount of nominal spending increasing at a faster rate than the amount of stuff there is to spend it on. To combat it, the Federal Reserve needs to get a grip on money printing and the federal government needs to adopt supply-side policies that increase the amount of stuff and not dump trillions of dollars of new spending into the economy. It is easier to conjure up newly greedy business people, but it doesn’t do any good.