The Radical Center
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The Radical Center

Inflation? It’s Too Early To Blame Joe

Both Left and Right are lying like crazy about price increases and inflation.

I will start with the accusations made by the Right claiming we are in an inflationary cycle and it’s all Biden’s fault.

Giving cursory credence to this fabrication is Biden’s spending proposals — most of which haven’t been spent yet—as the cause of inflation. Oddly when Trump was massively expanding the federal budget conservative fiscal hypocrites didn’t say a word. Trump, keeping with his normal business practice, spent other people’s money and bankrupted us in the sense of massively increasing the debt. Biden hasn’t had a chance to do that yet. I suspect he’ll make it worse, but I also suspect his increases will be lower than the promiscuous spending of Trump.

The federal budget before Trump remained relatively constant. There were increases but there were some years it went down. That changed when Trump took the reigns and ramped up spending like he was paying for Russian hookers. The Committee for a Responsible Federal Budget reported: “Since President Trump’s election in 2016, total spending has grown by nearly $800 billion — from $3.85 trillion (20.8 percent of Gross Domestic Product) in 2016 to $4.65 trillion (21.0 percent of GDP) in 2020.”

The reality is inflation isn’t an instant process. You don’t elect a politician who says some magic words and suddenly there is inflation. Price increases that are inflation related take time. The new money to be spent first and circulate, increasing demand and thus raising prices. To the degree that we are experiencing inflation the spending that caused it was put into place by Trump, not Biden. His spending is yet to come.

Next, there is the role of the Federal Reserve Bank and how it impacts money supply. Is Biden to blame for them? While the chair of the Federal Reserve Board is a Biden appointee the Vice Chair is a Trump appointee and of the other four members of the board three of them were appointed by Trump. So the majority of the board was nominated by Trump and only one Board member to date, was appointed by Biden. If the Federal Reserve is to blame then that’s on Trump, not Biden.

One clear indicator that many of the price increases are due to disruption of supply lines is the price of gasoline, or petrol. The Trump Zombies have been chanting Biden is to blame due to his policies but which policies and how they accomplished this are never explained. Associated Press reported,
“House Republican leader Kevin McCarthy and other members of his party are falsely blaming President Joe Biden for higher gasoline and lumber costs.”

AP noted at the time “while gas prices are at their highest level in six years, oil prices are still slightly below where they were in 2018. That suggests oil supplies are adequate and the refining and distribution of gasoline — through such networks as the Colonial Pipeline — are the problem.” The Drive warned readers in May, “Due partially to the pandemic, fuel companies are facing a scarcity of tank truck drivers. The net result is that between 20 and 25 percent of tankers in the fleet are sitting idle, according to the National Tank Truck Carriers (via CNN Business), and that means less fuel can be transported to gas stations across the country.” If gasoline delivery trucks are sitting idle the price at the pumps will go up even if the price of oil declines.

One might ask what policy of Biden’s not only did this in the United States but around the world, regardless of the policies in those other nations. In October The Guardian reported, “UK petrol prices have hit their highest level on record in a blow to hard-hit households and small businesses, and could rise further in the coming weeks as the global energy crisis drives oil markets to a three-year high.”

Apparently Mr. Biden has global powers of which we are unaware, even the remote tip of Southern Africa would have to be under his influence if the Republicans are telling the truth. News 24 there quoted the local Automobile Association: “The increases year-on-year since December 2020 are astronomical. Petrol has increased by more than 40%, diesel by around 44%, and illuminating paraffin by more than 70%. Wages and salaries have not kept pace with these heavy increases, and consumers will undoubtedly be under more financial pressure because of the knock-on effects on other products.” Unfortunately no one told the ruling African National Congress they could just blame the whole thing on Joe Biden. Even Brazil, under the inept thumb of Trump ally Jair Bolsonaro saw gasoline prices rise 40% in the last year.

It is often forgotten prices may increase due to issues of supply and demand, as well as inflation. Inflation is a decrease in the value of money relative to goods and services. It is a general decrease in the value of money, not a sporadic increase for some goods and not others.

We simply are not in normal times of supply and demand due to the pandemic. The continuing destruction of the virus — which is now largely the fault of skeptics, conspiracy theorists and anti-vaxers — is highly destructive to the economy. It dramatically reduces supplies and, as we’ve all seen, is also disrupting the distribution of goods that do exist. That is creating some general shortages as well as some spectacular local shortages.

Norbert Michel of the libertarian Cato Institute warns: “I have been urging caution, warning against the damaging effects of a prematurely tight monetary policy. The reason for this view rests on the underlying cause of the recent episode of inflation: unprecedented economic disruptions caused by the COVID-19 pandemic and the government’s responses. The pandemic (and the government shutdowns) caused unusually large and rapid swings in demand, as well as disruptions in the ability to supply goods and services.”

He notes that:

For the past several months, as demand has picked up, supply problems in a limited number of goods categories — which happen to be highly visible in consumer markets — have been responsible for the bulk of the increase in the CPI. In October, just three categories of goods are responsible for 46 percent of the overall CPI increase (food at 12 percent, gasoline at 22 percent, and used cars & trucks at 12 percent). Within the food category, the largest increases have been in several beef, pork, and poultry products. Rent accounts for another 19 percent of the overall increase, so just four categories explain almost two-thirds of the overall increase. (During most of the past 6 months, abnormally large relative price movements for a handful of goods have resulted in above-average changes in the overall CPI.)

In a nutshell: price increases today are largely due to supply-demand fluctuations more so than inflation. To the degree inflation is to blame it would be related to the prior president for the most part, with any impact from Biden yet to come.

Of course, the Right isn’t alone on this sort of scapegoating. Biden himself took a cue from the rather unreliable Elizabeth Warren and pinned the blame on oil companies and the price of oil. But the price of oil can go down while the price of gasoline goes up, particularly if the supply of gasoline isn’t being effectively distributed due to supply chain issues.

Warren went on TV to say the current price rises are not caused by Biden, as the Right claims. She is right about that but then she says prices at the gas pumps are up due “to giant oil companies like Chevron and ExxonMobile enjoy doubling their profits. This isn’t about inflation. This is about price gouging by these guys & we need to call them out.” Actually she needs to shut up and stop inventing facts.

Here are the gross profits for the three most recent full years for the two companies she targeted for her venom.

𝗘𝘅𝘅𝗼𝗻 𝗠𝗼𝗯𝗶𝗹𝗲
Gross profit 2018 $64.695B.
Gross profit 2019 $53.786B down 16.86% in one year.
Gross profit 2020 $30.942B down 42.47% in one year.

Gross profit 2018 $66.894B
Gross profit 2019 $62.267B down 6.92% in one year.
Gross profit 2020 $39.705B down 36.23% in one year.

Gross profits for 2021 may be up from last year but it is unlikely that either of these two scapegoats for Warren will see them at or above 2018 levels.

The choice isn’t just between inflation or alleged price gouging. With the pandemic supply chains for almost everything have been disrupted. When toilet paper was in short supply no one even thought to blame a mythical toilet paper policy of Trump. In fact the only “policy” he came close to having regarding toilet paper was to prance before the whole world with a train of toilet paper hanging from his shoe.

I am not saying that when all is said and down Mr. Biden won’t have some responsibility. I’m just saying it’s too early to blame him for policies that have been around long before he was elected. When it comes to encouraging the spread of the destructive pandemic Trump’s denialist policies were highly destructive and I think the pandemic and the almost 800,000 deaths it caused are both highly destructive to the economy and we are reaping what Trump sowed.

I voted for Biden, not because I thought he’d be brilliant, but because he wouldn’t be Trump. On issues of social freedom I knew he’d be far better than any Republican dares, given the power of authoritarian Puritans in the GOP. On economic issues he’d be less bad than Trump and less bad than Warren and what her wing of the party would want. I just don’t see the evidence to blame him for price increases — not yet at least.


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A blog for the Moorfield Storey Institute: a liberaltarian think tank.

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James Peron

James Peron is the president of the Moorfield Storey Institute, was the founding editor of Esteem a LGBT publication in South Africa under apartheid.