Don’t worry about inflation! As long as Congress passes President Biden’s $4 trillion spending plan, inflation will go away—according to President Biden. Wait! Worry about inflation! If Congress passes Biden’s $4 trillion spending plan, inflation will devour middle-class America—according to Senate Minority Leader Mitch McConnell, Biden’s chief Republican nemesis. Like so many other things, inflation is now politicized. So if you’re trying to figure out whether this is a problem or not, you probably won’t do it by listening to elected officials.
Inflation is now running at 5.4%, year over year. That’s more than three times the average inflation rate during the 10 years before the coronavirus pandemic. About half of the rise in prices is due to distortions caused by the pandemic. So without those anomalies, inflation would be around 2.7%, still higher than the prior 10-year average of 1.7%.
Biden and many economists insist this bout of inflation is temporary. But Biden and his fellow Democrats may be privately worried that it’s more serious than that. In remarks on the economy on July 19, Biden mentioned inflation several times, unprompted. He repeated his view that it’s temporary, but also acknowledged that unchecked inflation “would pose a real challenge to our economy.”
Then he said the cure for inflation would be enacting his proposals for enhanced child and elder care, and paid leave, which are part of Biden’s American Families Plan. “These steps will enhance our productivity, raising wages without raising prices,” Biden insisted. “That won’t increase inflation. It will take the pressure off of inflation, give a boost to our workforce, which leads to lower prices in the years ahead.”