The inflation rate isn’t much changed from last month’s high figure, 8.3 percent compared to 8.5 percent, new government data shows. CEI Senior Fellow Ryan Young spells out what the Fed, Congress, and the Biden administration can – and cannot – do about the problem.
Statement by Ryan Young:
“Inflation is now at 8.3 percent over the last year, down slightly from last month’s 8.5 percent. It’s still more than 4 times the 2 percent target rate, and there isn’t much Congress or President Biden can do about it. The Fed created today’s inflation by printing far too much money during the pandemic, and only the Fed can bring inflation back down by getting that money supply back in sync with what real economic output is doing.
“President Biden’s speech yesterday proposed a mish-mash of subsidies, price controls, and tax increases that would harm the economy while doing nothing about inflation’s root monetary causes. It would be better if he and Congress instead adopted a ‘first, do no harm’ approach and let the Fed do its job.
“There are things policymakers can do to address inflation-unrelated price increases in food, gas, and other goods. Getting rid of the China tariffs would offer instant relief on thousands of goods such as medicine, clothing, and electronics. Repealing the Jones Act of 1920, essentially a Buy American law for ocean shipping, would help ease gas prices, as would a more realistic approach to oil drilling. Lifting restrictions on occupational licensing would make it easier for people to find good-paying jobs while boosting economic output, which contracted last quarter.
“These reforms would provide symptomatic relief from rising prices, but the root monetary cause of inflation lies with the Fed, as does its solution. Don’t overestimate what Congress and the president can actually accomplish.”