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If you listen to the White House, the latest inflation data is cause for celebration, like an early Christmas gift to America. Yet nothing could be further from the truth. Inflation is still crushing American families, and there’s no financial cause for rejoicing—a sad situation during the holiday season.
The administration’s claims to be winning against inflation fly in the face of their own data. Since Biden took office, prices have risen 13.8 percent. In fact, prices have risen so much faster than wages that the average family has lost $5,800 in real annual income (i.e., what their incomes can actually buy). Conversely, real incomes rose $4,000 under President Trump.
Add on to that the increased borrowing costs resulting from higher interest rates, and the average family is effectively $7,100 poorer today than when Biden became president.
The administration’s fiscal and monetary policies are literally crippling people’s livelihoods, but you wouldn’t know that from the president’s speeches. He now cites a 7.1 percent inflation rate as an achievement. Those same speeches never acknowledge the fact his policies drove inflation from 1.4 percent at the time of his inauguration to 9.1 percent in less than two years.
Yes, 7.1 percent inflation is better than 9.1 percent, but it’s surely nothing to brag about. At the current 7.1% pace, prices will still double in about a decade. That is a horrific rate of inflation, and it’s breaking the back of the middle class.
Now the same president who told us inflation was transitory is predicting that it will be gone by the end of next year. Biden is always wrong, but never in doubt. The statistics from his own administration do not support that prediction at all.
In every month of Biden’s presidency, wholesale inflation (the price increases paid by businesses) has run hotter than retail inflation (the price increases paid by consumers). Businesses will be passing those higher prices on to consumers in the coming months, and that will continue to drive inflation.
Meanwhile, the president has no plans to curtail Washington’s profligate spending, which is the ultimate driver of inflation. When the federal government spends more than it collects in taxes, the Treasury must sell bonds to make up the difference. If the Treasury sells too many, it eventually runs out of people willing to lend it money at low interest rates. At that point, the Federal Reserve literally creates the money out of nothing and gives it to the Treasury.
That devalues the dollar. While it gives the politicians more money to spend, a devalued dollar hikes prices for businesses and consumers alike.
Inflation serves as a tax, but it’s a hidden one. That’s why many politicians don’t want it to go away. If you’re wondering where the government got the trillions and trillions of dollars it spent over the last two years, look no further than your family budget. Every time you pay more for groceries or gasoline, you are paying the hidden tax of inflation.
Democrats have displayed no desire to get the nation’s fiscal house in order. And despite their political rhetoric, it’s unclear whether incoming Republicans in the House will have the political will to tell their Senate counterparts ‘no’ when it comes to massive deficit spending.
Nevertheless, we have to have hope, especially at this time of year, that those in Washington will be persuaded to act responsibly so that this time next year the American people won’t still be tormented by this inflationary nightmare before Christmas.
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