We all see what’s going on in this economy. Inflation is high, and interest rates are spiking. People are bracing for an already-expensive summer as they avoid filling up their gas tanks and struggle to fill their grocery carts.
Many families have even reconsidered vacation plans because they need the money despite trying to tighten their belts and save.
If only the big spenders in Washington would listen to the public, take responsibility for poor economic decisions, and take real action to address the economic pain Bidenomics inflicts on people.
Instead, the inflation creators have tried to shift the blame and distract voters in an election year. It’s insulting and offensive.
Sen. Bob Casey (D-PA) has taken the lead for President Joe Biden and his friends in Congress with a series of cover-your-rear reports.
Casey’s reports tell tall tales about the causes of inflation. He blames so-called greedflation and claims that corporate profiteering is responsible for driving prices up. But his analysis is as misleading as it is flawed.
Casey’s claim that corporate profits rose 74% relies on cherry-picking the study’s start and end dates to serve his false narrative. It’s not based on sound analysis. He only looks at the second quarter of 2020 to the third quarter of 2022, which overemphasizes the pandemic’s economic distortions and associated government interventions. It’s also the only period during which profits increased — and only temporarily. However, measuring with a broader scope from the last fully pre-pandemic quarter at the end of 2019 to the last quarter of 2023 brings that figure down to 52%.
Casey also disingenuously mismeasured corporate profits. His claimed measure of “profit” does not adjust for taxes that companies owe the government, wild swings in inventory values, or the investments required to keep up with wear and tear on equipment and facilities. With these necessary adjustments, corporate profits have slightly declined as a share of the economy over the last four years.
So much for that bogeyman.
True, profits marginally increased during the pandemic. That’s unsurprising: Businesses, state governments, and households were all flush with cash. Why? Because Congress dumped money into the economy and the Federal Reserve dropped interest rates to nothing. Dino Palazzo, the Fed’s principal economist, shows an almost perfect match between the government’s extreme fiscal and monetary policy actions and temporarily higher business profits.
It’s important to remember that corporate profits comprise only around 10% of the economy and mostly finance retirement accounts and life insurance plans. Thus, corporate profits could not have caused inflation.
If not them, then what did?
The federal government created inflation.
Congress borrowed an extra $6 trillion on top of normal spending, supposedly for the pandemic. The Fed found itself forced to absorb most of the new debt. The Fed’s assets, the monetary base, doubled, and the money supply increased by as much as 42% compared to right before the pandemic.
Meanwhile, economic growth was weak. Initially, responses to a new virus battered the economy, but it mostly bounced back by the end of 2020. Then, in 2021, the Biden administration poured fuel on the fire by unleashing a red tape army on some sectors of the economy, even as it subsidized others.
Even before the pandemic, Democrats were far more likely to support higher spending. However, when Democrats took unified control of the federal government in 2021, their first action was an unnecessary $1.9 trillion blowout for the American Rescue Plan. This straw broke the camel’s back and triggered immediate inflation. Higher interest rates soon followed.
Bidenomics has since spiraled out of control, and now, in an election year, politicians are trying to sweep it under the rug.
Casey and other Democrats are keen to shift the blame. Republicans haven’t been blameless, but responsibility for inflation weighs much heavier on Democrats.
We at Americans for Prosperity agree with Casey on one thing: Economic pain and worry are plaguing the people. But it’s insulting to see him and Biden’s other allies in Congress trying to gaslight the public for political gain.
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Today’s challenges are a taste of coming troubles. If Congress fails to fix its broken budgeting and get the debt under control, the eventual fiscal crisis will dwarf the problems of the last few years.
We don’t need politicians who attempt to pull the wool over voters’ eyes. We need people in Congress who accept responsibility when they are wrong and put the blame for inflation and the economy exactly where it lies — with Congress, the president, and Bidenomics.
Kurt Couchman is a senior fellow in fiscal policy at Americans for Prosperity and a former senior legislative aide to Rep. Justin Amash. Illana Blumsack is an economic policy analyst at Americans for Prosperity.