The Real Blame for Inflation

Before assigning blame for inflation, it is important to understand the definition of inflation which is: The rate of increase in prices over a given period of time. In other words, if a 12 pack of your favorite beer was $10 last year and now the same 12 pack of the same beer is $11, that’s inflation rate of 10% annually.

Inflation is normal and necessary for a growing economy. Normally central banks and the government set a target inflation rate between 2-3%. But there have been many time in our history the inflation rate was much higher. For example, though I quit drinking some time ago, I was known to have one or ten beers in college during an evening of academic conversation and witty banter. When I was in college, inflation rates were increasing, dramatically. My last year in college the inflation rate was almost 9%. The next year it was 12% and a few years later peaked at 13%. My friends and I dealt with inflation head on by buying cheaper beer each. This was years before the age of beer snobs and after 2 or 3 beers, quality really did not make a difference.

Three of the main causes of inflation are rising costs of labor and materials, increased demand and decreased supply, and higher wages in response to higher costs of living. Higher wages lead to increased production costs and product prices, increasing the cost of living. Another significant factor is when the Federal Reserve increases the money supply with an objective of stimulating a slumping economy to either avoid or lesson a recession.

All of these led to higher inflation rates of 2021 and 2022. So the next question is why did this happen? The correct and only answer was the pandemic.

In November, 2005 President Bush while addressing the National Institutes of Health said the following:
“A pandemic is a lot like a forest fire…If caught early it might be extinguished with limited damage. If allowed to smolder, undetected, it can grow to an inferno that can spread quickly beyond our ability to control it…to respond to a pandemic, we need medical personnel and adequate supplies of equipment…In a pandemic, everything from syringes to hospital beds, respirators masks and protective equipment would be in short supply…if a pandemic strikes, our country must have a surge capacity in place that will allow us to bring a new vaccine on line quickly and manufacture enough to immunize every American against the pandemic strain.“
In November, 2005 President Bush laid out and funded a plan to prepare for a pandemic.

President Obama expanded President Bush’s pandemic response, developed a pandemic playbook named a health care czar.

The playbook was passed to President Trump who when the pandemic struck, said the playbook did not exist. A link to the playbook was sent out to the public proving its existence. Trump and his team could not find it. Trump also dismantled the pandemic response team that was initiated by President Obama. In another really bad move, cut funding for the CDC.

Following are quotes from Trump at the beginning of the pandemic.
Oct. 2019. “Currently, there are insufficient funding sources designated for the federal government to use in response to a severe influenza pandemic.”
Feb. 10, 2020. “I think the virus is going to be—it’s going to be fine.”
Feb. 10, 2020. “Looks like by April, you know in theory when it gets a little warmer, it miraculously goes away.”
Feb. 24, 2020 “The Coronavirus is very much under control in the USA… the Stock Market starting to look very good to me!”

The quotes could go but the picture is clear. Both Presidents Bush and Obama understood a pandemic was inevitable and detailed plans to deal with it. President Trump’s response was ignorant, uneducated and immoral. President Trump did not cause the global pandemic, but his lack knowledge, preparation and response clearly made it worse in the US. Much worse.

Years before infectious diseases scientists such as Dr. Peter Hotez had warned about the possibility of a coronavirus pandemic and requested funds to prepare a vaccine. He and others were rejected. At the beginning of his Administration, Trump had the opportunity to expend infection disease research and develop vaccines. The above quote in October, 2019 from Trump accurately sums up his position and knowledge.

When the pandemic hit, the global supply chain shut down. The US supply chain was part of this. Consequently prices went up. Inflation. At the same time, with less workers looking for jobs, employers had to pay more to their employees or they would leave for a better paying job. Inflation. The federal government flooded the economy with cash, literally giving it way. Inflation.

President Biden inherited this mess. Inflation was 7.0% in 2021 and 6.5% in 2022. In 2023 it was 3.5%. 2024 inflation is on pace to be about 2.5%.

The pandemic inevitable, Bush and Obama understood this. Trump did not understand this in 2016 and I doubt if he understands this today. There is no doubt in my mind that if the pandemic would have happened under either Bush or Obama the US would have been better prepared, the response quicker and the consequences, both human and financial, significantly less.

So whose fault was the higher inflation rates. If you had to pick one person, it has to be Trump because of his lack of preparedness and response to the pandemic. Who else is responsible, anyone who voted for Trump in 2016.

Finally, inflation is not higher by historical comparisons. The Trump campaign blames Harris for inflation rate when they should be thanking Biden for reducing inflation rate. Blaming Harris is a lie by the Trump campaign. No news there, lying is the only thing Trump and his supporters have going for them. But you do have to give them credit. They are good at it.