Janet Yellen, Secretary of Treasury, is now blaming average Americans for inflation, which she memorably dismissed as “transitory,” but which is now plaguing every American. What did she say? That Americans are “splurging,” especially on “technology” which explains 2022 inflation. Forgive me, Madam Secretary, but this is just “bunk.” Give me a break.
First, while Americans cut spending during the 2020 and 2021 – a product of nationwide lockdowns, which drove dozens of big-name companies and thousands of smaller ones into bankruptcy – a tentative return to employment and spending is not a “splurge.” Companies lost hundreds of billions in COVID. Gradual recovery from that collapse is not a “splurge.”
Second, many of the bankruptcies trigging a slide into recession and rising unemployment were in the traditional energy sector – driven by Biden, not COVID. Since 2020, hundreds of energy companies have gone bankrupt, value in the sector plummeted, and fossil fuel sector employment fallen off a cliff. We saw “splurge” from the unemployed in that sector.
Third, as the Secretary knows, inflation is a function of insufficient supply to meet demand, and when government spending is considered, too much spending without revenue to support it. Both of these are happening now, but not because demand is out of control.
Instead, demand has struggled to return to normal, while supply of everything – which is dependent on fossil fuels – has struggled to keep up. This is the prime cause of inflation. When a major part of the energy sector is intentionally diverted, slowed, and shut down, the price of gas rises. It rose $1.98 to $5.00 between January 2021 and July 2022. That raises all dependent prices, from fertilizer and food to transport and heat.
To this, add another basic – enormous – cause of inflation, now and always. When a government, which produces nothing and is not checked by profit motive, losses, or bankruptcy – when it spends in excess, the result is a devaluation of the currency domestically.
That is happening in spades. Biden and the Democrat Congress spent more than seven trillion dollars, and Biden aims to spend unilaterally another trillion on loan forgiveness, yet in that 24 month period, they took in 4.1 trillion. Stepping back, this has driven national debt to 31 trillion.
With all due deference, the Secretary – and former FED Chair – knows this. She also knows that attempts to slow inflation will take time, and elevated interest rates – versus reopening the energy sector and cutting federal overspending – will only drive this economy deeper into recession, raising the cost of borrowing, interest on credit cards, mortgage rates, and everything else.
That, of course, causes cuts in hiring and investment, since higher interest and rising wages means companies have to recoup those loses somewhere. To survive, they cut employment and raise prices, which reinforces price inflation, causing insecurity that produces demands for higher wages, just accelerating the cycle.
No, Madam Secretary, the average consumer is not to “blame” for an economy that is unusually volatile, markets that are in constant churn, and a riptide of confidence – up with federal handouts, down with the hangover of paying for them.
This inflation disaster – which is not likely to end soon – is NOT the fault of consumers, many of whom lost their jobs, job security, stable incomes, and basic ability to pay bills from the combination of overzealous lockdowns and wild federal spending, further compounded by putting energy in peril.
The sad thing is this administration has few members with any credibility at all – with lies, misstatements, and shading of basic truth a daily White House event. Secretary Yellen was one who still had some measure of public trust. To put her on late night comedy to blame Americans is a sad turn.
This turn, in the final analysis, tells us something important. The Biden White House has no answers. The President’s team is doubling down on nonsense, the idea that Americans who want to work hard for dollars that keep purchasing power and can be saved without loss – are now to blame.
What is needed is not complicated. It is actually quite simple. America needs to have leaders who cut excess federal spending, control expanding entitlements, reward work rather than non-work, if possible cut taxes – leaving more money in private pockets. Also needed is a reopening of – and pride in – the fossil fuel sector, even as we explore renewables, efficiencies, and carbon sequestration.
Getting this right is not hard. And perhaps – direct to the point – the party that is “splurging” is not the average worker, consumer, and taxpayer. This is not the fault of Americans. It is the fault of this Federal Government, which needs to stop spending in excess, respect the average American, not fob off their failures on those who – ironically – pay their salaries. Blaming Americans for inflation is just bunk.