More than two years after inflation exploded to record highs in the U.S., the Biden administration is still struggling to tamp it down. The latest reading on prices again came in hotter than expected, a familiar conclusion in recent months. In fact, the last time the annual inflation rate was measured at below 3% was March 2021, just two months into the Biden presidency. The Federal Reserve's target is a 2% annual rate, which still appears far off. This week, Fed Chair Jerome Powell acknowledged that inflation is still too high, and there needs to be a slowdown in economic growth to bring it down.
While the Fed has been attacking inflation with interest rate hikes since early 2022, the fiscal policy coming out of Washington, D.C. under the Biden administration has had the opposite effect. "Right now, monetary policy and fiscal policy are basically at loggerheads, and fiscal policy is winning," says EJ Antoni, economist with the Heritage Foundation. "So long as we continue to have a Treasury Department with these blowout budgets and massive deficits, we are going to continue having inflation."
Indeed, thanks to massive spending bills like the American Rescue Plan and the ironically-titled Inflation Reduction Act, the national deficit has grown to more than $33.5 trillion, a record high. "We are simply not going to get inflation down anywhere near normal levels, until we reel in this government spending," says Antoni.
In recent months, the Biden administration has touted improvement in inflation numbers from the historical highs of last year. But as Powell and other economic experts have said, inflation simply remains too high and there is no sign this administration will be able to rein it in. "The people at the levers of power today don't seem to have much incentive to really bring down government spending," says Antoni. "And so we are stuck with the consequences of the last election, I guess you could say."
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