By Richard Eckstrom,
S.C. Comptroller
Having left inflation unchecked for so long, the challenge now for the White House and the Federal Reserve Board is keeping soaring prices from overwhelming family budgets without triggering a recession. It’s a delicate balance. Are they up to the challenge?
So far, the president’s actions don’t inspire much confidence.
The White House spent much of last year downplaying the threat of inflation – even as most of us could see the price hikes in our grocery receipts and at the gas pump. When prices rose too sharply to be ignored, the White House spun it as “transitory,” or temporary, inflation brought on by pandemic-related crimps in supply chains. But that ignores the role that printing trillions of dollars in the name of “pandemic relief” played in creating a surge in consumer demand, thus feeding inflation. (Increasing the amount of money circulating in an economy relative to the amount of goods and services available for purchase is a recipe for inflation – and not the temporary kind.)
The numbers are in, and consumer prices rose a whopping 7 percent in 2021 – a four-decade high. Americans are shelling out more and more for food, gas and bills. The “transitory” argument has shown itself to be false, and the White House has belatedly abandoned such talk.
Either the president badly misread the inflation threat, or he wasn’t being level with the public. I suspect it was the latter; after all, he had spending plans to push… and the prospect of sustained inflation potentially threw a monkey wrench into those plans. Either way, the White House’s credibility on inflation matters has taken a big hit, and it’s a self-inflicted wound.
The president’s most recent spin is that corporate greed is to blame for ballooning consumer costs. But that’s not a serious assertion. Businesses didn’t become greedy last year and decide all at once to gouge their customers. Demand soared following a federal spending binge combined with Americans spending the money they’d saved by staying home in the early months of the pandemic. So baffling is this latest White House argument that the Washington Post – one of the news outlets most inclined to support the president – panned his “bizarre message on inflation.”
Often called “the cruelest tax” because of the numerous ways it impacts people’s daily lives, inflation affects virtually everyone. It diminishes the purchasing power of families and businesses. Its sting is worst for those of lesser means and for seniors on fixed incomes, who tend to spend a greater proportion of their money on essentials like food and energy, which are most affected by inflation. Because inflation slashes the purchasing power of savings accounts, those at or near retirement may find their golden years less secure.
This is a time for serious leadership. The White House – as well as the Federal Reserve Board and Congress — must be laser-focused on rolling back inflation.
They must move with deliberation and resolve. And shooting a little straighter with the public can’t hurt, either.
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Richard Eckstrom is a CPA and the state Comptroller. He’s president of the National Association of State Auditors, Comptrollers, and Treasurers.