Those who don’t know history are doomed to repeat it.
This well-known adage is often attributed to Winston Churchill from a speech in 1948 to the British Parliament, in between his two stints as Prime Minister. But Churchill paraphrased the saying originally from an 18th century MP, Sir Edmund Burke.
The story of present-day high inflation in the United States—with a gallon of gasoline now exceeding $5.00, and overall prices increasing by a 40-year high of 8.6 percent—is a stark reminder of politicians willfully ignoring history and repeating its policy blunders.
Inflation rampaging America’s economy is the result of the combination of $6 trillion in new, supplemental federal spending since 2020, ostensibly to combat the coronavirus, and the Biden administration’s climate-change war on traditional energy by restricting domestic production.
Jerome Powell, the chairman of the Federal Reserve Board, which controls the nation’s monetary policy and supply, is now playing catch-up on inflation with his massive increase in the prime interest rate of 75 basis points. But his failure to learn from history is mild compared to the political class.
Inflation is fundamentally a monetary issue, the famous economist, Milton Friedman, taught us; specifically, having too much money chasing too few goods. Excess money in circulation converging with a restricted supply of goods invariably increases the cost of the latter and thus cheapens the value of the former.
At the behest of the fanatical Climate Industrial Complex of politicians, mega-donors, activists, and hucksters alike, Joe Biden embraced the climate-change dogma on day one when he canceled the Keystone XL pipeline and since imposed restrictions on fossil fuel extraction on federal lands and off-shore. His climate executive orders also are designed to steer private investment and capital away from companies that produce and sell oil, gas and coal – further restricting supply and raising prices.
Fossil fuel energy is the lifeblood of the American economy – or any economy. When its price sharply increases, it brings a harmful ripple effect on the cost of production and transportation of every other good and service. Indeed, this predictable recipe for inflation noticeably hit the American consumer months prior to the Russian invasion of Ukraine and is hardly “transitory.”
Until now Americans under the age of 50 had no recollection of palpable inflation, much less experienced rapidly increasing consumer prices.
By contrast, every leader of America’s governing class, from our 79-year-old President to the octogenarian Speaker of the House, Nancy Pelosi, and the 71-year-old Senate Majority Leader, Chuck Schumer, surely recall the last time America experienced rampant inflation.
Through most of the 1970’s when inflation last took off, President Biden and Sen. Schumer were elected officials – Biden was a U.S. Senator from Delaware and Schumer was a New York State Assemblyman from Brooklyn.
At best, they learned nothing from inflation history; more likely, they didn’t care (“Milton Friedman isn’t running the show anymore,” Biden dismissively said last April). Now they are presiding over its repetition to supposedly bring about the “transition” to renewable energy.
For the first time in 42 years, inflation will be the top voter concern in the election this year, which bodes ill for the Biden administration and the Democratic congressional majorities, both of which have been zealous to wage war on fossil fuels and were all too giddy to print and spend trillions more dollars after the worst of Covid had passed.
But for Democratic Sen. Joe Manchin of West Virginia, still more trillions would have been spent by enacting the Biden administration’s Build Back Better plan that would have made a crippling inflation problem worse.
Rather than increase domestic energy supplies, the president is perversely playing the mendicant with dictators and America’s enemies to supply more oil.
Now that the Fed is raising interest rates to slow the economy enough to cool the demand side of the inflationary spiral, it’s tardiness will not go well. We also know this from history.
By 1978, President Jimmy Carter’s second year, inflation was a simmering problem that became a big one. The following year Carter finally appointed a new and capable Fed Chairman, Paul Volker, who warned that inflation can and must be cured by sharply raising interest rates. The economy faltered to a nearly three-year recession as rates peaked north of 20 percent.
Not until late 1982, midway through President Ronald Reagan’s first term, was inflation largely wrung out of the economy due to tightening money and increasing the supply side of consumer goods through income and business tax cuts. Only then did genuine economic growth return and America begin nearly uninterrupted prosperity that endured for a generation.
History is ominously repeating. The ‘70’s inflation is back, without the bell-bottoms and disco music. It won’t be tamed any time soon, while pointless climate-change policies make it more lasting and unbearable.
- Peter Murphy
- Peter Murphy is Senior Fellow at CFACT. He has researched and advocated for a variety of policy issues, including education reform and fiscal policy, both in the non-profit sector and in government in the administration of former New York Governor George Pataki. He previously wrote and edited The Chalkboard weblog for the NY Charter Schools Association, and has been published in numerous media outlets, including The Hill, New York Post, Washington Times and the Wall Street Journal. Twitter: @PeterMurphy26 Website: https://www.petermurphylgs.com/
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June 30, 2022
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