Inflation Ramps Up

The US Bureau of Labor Statistics just released the latest Consumer Price Index data and it doesn’t look good. While some pundits might focus in on the one-month percent change, an increase of 0.4%, that’s not the whole story. Since last year:

• All items have increased in price by 8.2%.
• All items aside from food and energy have increased in price by 6.6%, the highest increase since 1982.
• Food prices alone has increased 11.2%.
• Energy prices alone have increased 19.8%.

Americans don’t need a government report to tell them this. They see it at the grocery store, at the gas pump, and how little their paycheck can buy compared to just a few years ago. The problem is government. The solution is getting government out of the way.

As Milton Friedman put it, “Inflation is always and everywhere a monetary phenomenon and it can be produced only by a more rapid increase in the quantity of money than in output.”

The federal government’s rampant deficit spending is partially responsible for faster monetary growth at the Federal Reserve. Since 2020, the federal government has financed the largest spending increase since World War II with debt and the Federal Reserve has purchased that debt with newly printed money, dramatically increasing the money supply.

The ironically named “Inflation Reduction Act” has made inflation worse. As ALEC VP of Policy Lee Schalk put it:

“The inflation Reduction Act amounts to a Trojan horse for a progressive wish list of policies. It’s got everything from higher taxes on businesses, price controls for healthcare, and pharmaceuticals, that people rely on. But also higher taxes on energy producers, even hiring more IRS agents to harass Americans…It’s actually going to increase inflation.”

The Federal Reserve should focus on monetary policy to help tame inflation instead of enabling massive government spending, income redistribution, and pushing politicized investment strategies such as ESG.

Although state leaders don’t have control over what the Fed does, they can still help fight inflation by getting government out of the way and allowing output to grow.

Thanks to the State Flat Tax Revolution of 2022, millions of state taxpayers will keep more of what they earn. State leaders can also enact regulatory reforms and occupational licensing reforms that remove harmful barriers to starting a businesses and allow America to get back to work. In addition, the newly released, ALEC Energy Affordability Report outlines how energy policy based in free market principles and innovation can help make energy affordable.

Policy gets complicated, and it can be difficult to know what to do. ALEC is here to be an educational resource for sound policy solutions that help people prosper.