Are Democrats Seeding Higher Inflation to Boost Election Prospects?

Sacrificing long-term US economic health for short-term political gain.

(Photo by Spencer Platt/Getty Images)

Human dreams of predicting the future have a special playground in forecasts of market prices. Whether the market is tulips, pork bellies, stocks, real estate, or cryptocurrency, the urge to know the future direction of the economy is as ancient as bartering. A question facing Americans in 2024 is whether that desire to influence the economic tea leaves has become corrupted by partisan politics, as alleged in a recent white paper that suggests the Biden Treasury Department may be seeding future inflation by manipulating markets and the economy to improve election prospects in November.

The Costs of Massive Spending

Massive spending by the Biden administration for COVID-19 and renewable energy subsidies ballooned the US deficit and debt service costs, but it also sparked persistent inflation in food, housing, and energy that has left most Americans behind. Real wealth is shrinking, and the economic future for young voters is bleak. The dissembling response of Democrats has been to shift the blame, saying the cause of price hikes is the fault of corporations (“shrinkflation”), Vladimir Putin, or COVID-19.

In his insightful study of fiat currencies, Money Mischief: Episodes in Monetary History, economist Milton Friedman forcefully made the case that “inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” Friedman warned that there was a constant political temptation to print money to reward one’s base, compounded by the shielding protection that sloppy monetary policy is very difficult to causally link to the inflation damage inflicted (as is seen in the current administration).

Friedman explained that as the rate of monetary growth increases:

“The effect on prices, like that on income and output, is distributed over time, but it comes some twelve to eighteen months later, so that the total delay between a change in monetary growth and a change in the rate of inflation averages something like two years. That is why it is a long row to hoe to stop an inflation after it has been allowed to start. It cannot be stopped overnight.”

Biden’s Inflation Achievements

Biden’s inflation has not been stopped. It has impacted food and energy prices, mortgage rates, and economic growth. The costs of virtue-signaling climate and pandemic policies are coming home to roost in grocery stores and skyrocketing rents. The Democrat response, ignoring basic math in favor of vain ideological imaginings, is to scapegoat the rich, corporations, or other fantasy bogeymen for the nation’s plight and call for yet more economically harmful policies.

Representative Ilhan Omar (D-MN) has introduced legislation requiring companies to print packaging labels when they increase prices, which only adds costs to products while virtue-signaling and blame-shifting. Kamala Harris calls for higher wages to counter the inflation she and Joe Biden seeded. Social justice economics favors unearned “basic universal income” for nonworking citizens. And the president has called to freeze rent increases. Friedman foresaw these familiar antics:

“Price and wage controls are sometimes proposed as a cure for inflation…. [but] are counterproductive for this purpose. They distort the price structure, reducing the efficiency with which the system works. The resulting lower output adds to the adverse side effects of a cure for inflation, rather than reducing them. Price and wage controls waste labor, both because of the distortions in the price structure and because of the immense amount of labor that goes into constructing, enforcing, and evading the controls….

“The end result is more inflation, not less. In light of the experience of forty centuries, only the short time perspective of politicians and voters can explain the repeated resort to price and wage controls.”

This folly is on display in California, where Gavin Newsom’s grand scheme to increase fast-food workers’ wages promptly resulted in more than 9,000 layoffs. Economies are controlled by math and consumer choices, not government edict.

Frantic to push off responsibility for the inflation they have unleashed, Harris and Biden would love the Federal Reserve to drop interest rates quickly and sharply to provide a short-term panacea to voters as November approaches. But to do so for political reasons threatens to pour inflationary fuel on the monetary policy pyre. Politicians (and voters) always want to drop – never raise – interest rates, but this risks more inflation, and eventually that dirty word, “stagflation” – a period of high inflation concurrent with a stagnating economy.

“Active Treasury Issuance”

The recent white paper alleges that the Biden/Harris crew is doing exactly that – it accuses the Biden Treasury Department of “conspiring to boost the economy for political ends, and of risking a revival of inflation in the process” by issuing excess short-term Treasury Bills which amounts to a stealth quantitative easing. The authors assert this is “tantamount to deliberate manipulation of the economy,” characterizing this as “activist Treasury issuance.”

The Treasury has not presented a plausible explanation for its recent actions. Stock markets have roiled in fear of economic recession, and jobs reports have delivered troubling news. Inflation persists despite official gaslighting. Consumers believe the nation’s economy is wobbly despite assurances by (politically-tainted?) “expert economists.” Tennessee Republican Senator Bill Haggerty is outspoken in his condemnation of the Treasury’s money meddling:

“Politics has no place in Treasury debt issuance. Sadly, Secretary [Janet] Yellen’s Treasury has manipulated long-term interest rates by dramatically shifting the maturities of U.S. debt, all in an effort to boost the economy before November,” he said. “This back-door quantitative easing undermines the public’s trust in our nation’s debt, and poses significant risks to our government’s ability to respond to future crises.”

Haggerty may have taken his cues from Friedman, who observed that when governments print more money than is fiscally wise, “the extra money printed is equivalent to a tax on money balances.” Liberty Nation News economics pundit Andrew Moran calls these “stimulant measures by stealth.” Americans sense that the giant sucking sound growing louder each day is the federal government recklessly siphoning their families’ accumulated real wealth from their wallets, bank accounts, and retirement hopes.

(Originally featured at Liberty Nation News.)