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Your View: ‘Shrinkflation’ ignores the true problem: deficit spending

A customer shops for food at a grocery store. Overall consumer prices are up nearly 18% since January 2021. Justin Sullivan/Getty Images
A customer shops for food at a grocery store. Overall consumer prices are up nearly 18% since January 2021. Justin Sullivan/Getty Images
Nathan Benefield  /(Ed. Note: NEWS - Your View - mc-truth-schools-teach-benefield-yv-0802 - CONTRIBUTED PHOTO / COMMONWEALTH FOUNDATION)  Proposed budget deal still contais negatives for taxpayers (11/15/15) 



User Upload Caption: Nathan Benefield is the senior vice president of the Commonwealth Foundation, Pennsylvania’s free-market think tank. Contributed photo

President Joe Biden and U.S. Sen. Bob Casey deflect blame for high inflation away from the true cause: their own policies. They should be embarrassed by this lame blame game.

“Inflation is always and everywhere a monetary phenomenon,” said Nobel-winning economist Milton Friedman. Expanding the money supply — or “printing money” — causes inflation. That happened when Biden and congressional Democrats went on a spending binge, ignoring warnings of impending inflation.

The result: Overall consumer prices are up nearly 18% since January 2021.

Now that voters are upset about inflation and rising prices, Biden and Casey have tried to blame corporations for their greed. But to believe that means believing corporations were not greedy for the several decades when inflation remained relatively low.

Lately, Casey and Biden have resorted to talking about “shrinkflation” to deflect from their failed policies and deficit spending. But, as Erik Boehm of Reason rightly points out, shrinkflation is inflation.

The Consumer Price Index measures the size of products when calculating inflation. The U.S. Bureau of Labor Statistics, which calculates CPI, stated that “downsizing” — another term for “shrinkflation” — has a “minuscule effect on overall inflation.”

When your money becomes less valuable due to inflation, businesses must raise prices or sell you less. The fact that $1 buys fewer potato chips than it did three years ago is a direct result of Biden’s inflation.

Meanwhile, prices on everything are up. Compared with three years ago, bread is up 26%, eggs 37%, milk 16%, fresh fruits 13%, coffee 21%, cigarettes 23%, cereals 25% and meats 20%. Also, housing is up 20%, new vehicles 20%, gasoline 35%, electricity 28%, legal services 24%, and funeral expenses 13%.

Believing every corporation in every economic sector has colluded to raise prices across the board is hopelessly naïve.

Some politicians also erroneously ascribe to “modern monetary theory,” which suggests that deficit spending has no consequences, the federal debt doesn’t matter and printing trillions of new dollars doesn’t matter.

They were proven wrong.

Congress and the White House authorized nearly $7 trillion in “emergency” COVID-19 funding (and, in all fairness to Biden, former President Donald Trump approved some of this spending binge). As a result, the U.S. national debt jumped by more than a third to just under $35 trillion today.

The Federal Reserve primarily funded this spending increase by purchasing about $5 trillion in U.S. Treasury securities — the modern-day equivalent of printing money. As predicted, this policy — a 13% increase in the money supply from January 2021 to April 2022 — directly resulted in more inflation.

Lawmakers should accept the textbook definition of inflation. Most economists agree that increased federal deficit spending will increase inflation and interest rates.

Career politicians like Biden and Casey — with eight decades of combined experience as elected officials but no experience running a business or working a real job — may not understand why prices go up, but voters do.

Rising prices became — and have remained — a top concern for voters.

And voters rightly blame “Bidenomics” for their increased cost of living. In Pennsylvania, a plurality of voters — 46% — believe Biden’s policies worsened economic conditions.

Workers aren’t happy with Bidenomics because they are poorer than three years ago.

Here in Pennsylvania, workers have seen wages increase, but these haven’t kept up with inflation. From January 2021 to January 2024, the average weekly pay for all workers in Pennsylvania increased 11.4% (to about $1,060 per week). But when adjusted for inflation, this represents a 5.2% decline in real earnings — a loss of more than $2,565 in annual buying power.

When voters opine about the economy in poll after poll, they are right.

Biden and Casey want to change the narrative in time for the 2024 election. But their rhetoric and blame-shifting create a greater threat: a refusal to learn from their past mistakes and failed policies.

Instead of blaming business, Biden and Casey should admit that massive spending increases created inflation and commit to controlling spending, reducing the annual deficit and managing government debt.

Anything short of that, inflation’s toll on working families will continue.

Nathan Benefield is the senior vice president of the Commonwealth Foundation, Pennsylvania’s free-market think tank.

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