White House Victim-Blaming on Inflation

Economists say inflation is the result of bad monetary policy. The Biden White House, however, says inflation is caused by greedy companies.

I debunk that nonsensical claim in this excerpt from a recent discussion on Let People Prosper.

At the risk of stating the obvious, everything you need to know about inflation is captured in this chart.

Simply stated, the Federal Reserve dramatically increased liquidity in 2020 and 2021.

That meant a lot more money sloshing around the economy, above and beyond what would have been necessary to keep pace with economic activity.

So of course prices spiked.

Biden could have deflected political blame by pointing out the bad monetary policy started when Trump was in the White House.

But since the bad policy continued after he took office, that’s not a persuasive strategy.

Which is why the White House has decided to engage in victim-blaming.

In an article for the New York Times, Nicholas Nehamas, Jim Tankersley and Kellen Browning report on the White House’s blame-shifting strategy.

As high prices at grocery stores, gas pumps and pharmacies have soured many voters on his first term, President Biden has developed a populist riposte: Blame big corporations for inflation, not me. …progressives are urging Mr. Biden to…make “greedflation,” as they call it, a driving theme of his re-election bid. …Inflation soared under Mr. Biden in 2021 and 2022… What Republicans call “Bidenflation” has become one of the president’s biggest political liabilities in his rematch with Mr. Trump. …Mr. Biden has…attacked corporations for pricing practices in certain sectors such as meatpacking, snack foods, concert tickets and gasoline. …Some economists close to his White House disagree that corporations’ raising prices to juice profits is a major driver of inflation. …There are signs that Mr. Biden plans to emphasize this issue more in the coming weeks. …a campaign spokeswoman…said Mr. Biden had “repeatedly taken on corporate greed” and would be “telling that story every day in every possible way on the campaign trail, from ads to door knocking and more.”

I’m not the only one to mock Biden’s strategy.

In her column for the Wall Street Journal, Allysia Finley says Biden and his allies are “inflation deniers” for trying to blame the private sector.

Behold the political left’s version of “stop the steal,” a device that blames corporate greed and malfeasance for inflation. …Democrats from President Biden on down promote this conspiracy theory to dupe voters. …Retailers are getting squeezed by higher costs for products, labor, energy, rent and insurance. Since the start of the pandemic, food prices at stores have increased by 25%, less than the bump in average grocery worker wages (33%) and farm product prices (32%). …Democrats have even introduced the Price Gouging Prevention Act, which would empower the FTC to impose de facto price controls on food, gasoline and other products. The result? Widespread shortages. Mr. Biden has joined his party of inflation deniers. In March he convened a “Strike Force” to “root out and end illegal corporate behavior that raises prices for Americans…” A San Francisco Federal Reserve study last month refuted that inflation has been caused by price-gouging. …What’s fueling inflation? Excessive fiscal and monetary stimulus.

Well said, though I would quibble on two things.

First, I try to avoid using “stimulus” to describe Keynesian fiscal policy or Keynesian monetary policy unless I include “faux” or some other word to express my fundamental disagreement.

Second, bad fiscal policy doesn’t cause inflation.

But I’m digressing. The bottom line for today is that Joe Biden and his allies are wrong to blame businesses. The entire private sector (households and businesses) are the victims of inflation.

P.S. To understand inflation, click here and here. Or, if you want to dive into the issue, click here.

P.P.S. The media doesn’t understand inflation (or pretends not to).

P.P.P.S. Some central bankers don’t understand inflation (or pretend not to).

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Image credit: Biden13 | CC BY 2.0.