From the gas pump to the grocery aisle, Americans are feeling the pinch of rising prices. The question on everyone’s mind: Why is everything so expensive?
The answer, in part, is rampant inflation on top of a tangled web of subsidies and restrictions.
Since 2021, the United States has experienced the highest inflation levels in decades. In the summer of 2022, inflation reached a 40-year high of 9.2%, and Americans across the country felt the pain of rapidly rising prices. While inflation is not as high today as in 2022, life is much more expensive than it was four years ago, and prices keep growing faster than the Federal Reserve aims for.
Inflation is not an incurable disease, however. We defeated it once, and we can do it again. We can build an inflation-free economy by halting government spending that causes prices to spiral out of control.
How do you put the inflation genie back in the bottle?
Inflation is a tricky economic problem, as it is easy to create but hard to solve.
Governments cause inflation by printing too much money into the market, reducing their value. Over the last couple of years, the Federal Reserve has raised interest rates, which reduces the money supply by making borrowing more expensive. However, inflation remains stubbornly high.
What does this mean? Are we doomed to suffer from higher-than-usual inflation in the near future?
No, we are not. We can push inflation back into the rearview mirror; we just need to address the root of the problem and reduce reckless government spending.
Getting federal spending under control will be a tough job. However, there are some concrete steps Washington can take to start putting the government’s finances in order and set up our economy to be inflation-free in the long term:
- Create one comprehensive budget: Simplify and rationalize the archaic and unpractical budgeting process by creating one budget that includes all federal spending and revenue. Doing this will allow Congress to engage in honest and transparent debate on the true scope of government spending.
- Fix entitlement programs: Many of the entitlement programs upon which millions of Americans rely are on the brink of insolvency and are projected to consume larger percentages of the federal budget yearly. We must take urgent steps to protect these programs and the budget from insolvency.
- Prevent government shutdowns: The yearly game of chicken surrounding government shutdowns only encourages more spending. It’s time to end shutdowns and restore sanity in the budgeting process.
Straightening out our confusing and impractical budgeting process will put us on the path toward fiscal sanity, making it harder for future governments to overspend our way toward inflation.
However, the best way to prevent high inflation from happening again is to understand what caused inflation in the first place and avoid making the same mistake twice.
What is causing inflation in 2024
Despite what President Joe Biden might tell you, inflation is not the fault of supply-chain woes, Vladimir Putin, or corporate greed. It happened because the government has spent and printed record amounts of money over the last four years.
Like any other good, money’s value is based on supply and demand. It will be worth less if the government prints more money than the market can handle.
The government prints money when it wants to spend more money than it has. The Federal Reserve does this by buying Treasury securities, injecting the economy with trillions of dollars. Usually, prices do not rise too much because there is enough demand for the U.S. dollar.
However, the money spent between 2020 and 2024 overwhelmed the markets.
At first, Washington authorized record levels of new spending as a response to the pandemic. Then the Biden White House made it worse by authorizing a whopping $5.5 trillion of new spending on top of what was already expected.
The result? The money supply skyrocketed almost 35% in just four years.
If snack companies suddenly ramped up production and flooded the market with 35% more Doritos, then you would expect their value to come crashing down. It’s the same thing with money; there is no way pumping dollars into the market at that rate will not decrease their value.
The best way to defeat inflation is to prevent it from ever happening again. These last four years have been a painful crash course on how irresponsible government spending creates inflation.
Washington made a mistake, and Americans paid for it. We must remember that and demand that our elected officials learn from that mistake and end runaway spending once and for all.
