The Consumer Price Index (CPI) for April, published by the U.S. Department of Labor, announced on Wednesday is at an annual inflationary peak of 4.2 percent. However, this should not come as a surprise because absolutely all the economic measures implemented by the Biden administration during its almost four months in office would lead to a sharp increase in prices, as repeatedly warned by the most conservative sectors.
Multiple factors added up to reach a level of inflation today not seen in the United States at least since 2008; however, it was to be expected considering each of the policies implemented since Joe Biden took office as president. While everyone expected the arrival of inflation, even critical economists fell short of the reported estimates.
Economists were generally announcing year-over-year inflation of 3.6 and monthly inflation of 0.2 for April, but the data reported that the “core” CPI was up 0.9 percent from a month ago, four times the estimate.
Among the factors that would have generated the widespread increase in prices is the normal economic recovery after a pandemic year in which markets were paralyzed, mainly due to the decline in retail consumption.
On the other hand, wage earners who did not lose their source of income generated extraordinary savings due to the confinement lifestyle during the last year, and now with greater freedoms, they began to spend more freely, generating greater demand.
But add another not minor issue: the overblown $1.9 trillion taxpayer stimulus package promoted by Biden that was implemented last month. This massive infusion of money and the stimulus checks, coupled with pent-up consumer demand and excess savings, created an explosive combo with no other way to translate than with rising prices.
The most worrying thing, say some economists, is that the effects of the stimulus package have not yet impacted the economy, so an even more chaotic future is expected.
At the same time, a sustained increase in public spendings, such as that proposed by the Democrats, can only be offset by a tax increase that balances the balance between revenues and expenditures of federal funds. By increasing taxes on the productive sectors, they inevitably raise their prices to meet the cost increases. And how does this translate into higher inflation?
Several critics warned that this situation would arise while the stimulus package promoted by the Democrats was still being debated in the Senate. One of them was the investigative journalist Mark Levin. He strongly criticized the Democratic party and specifically the Biden administration for implementing policies that would inevitably lead to a fiscal imbalance due to the enormous public spending that, according to him, can only be compensated with an exponential increase in taxes and inflation.
Another worrying situation that directly affects the issue of price increases is the Biden administration’s energy policies.
Fuel prices in the United States have shot up by 30 percent since last year, partly due to the international situation, but mainly boosted by the new energy policies imposed by President Biden, who seems to be interested in increasing prices even more, to develop businesses associated with renewable energies, warn experts.
Demand for fuels has increased as the economy has begun to revive, but Democratic policies also reduce oil supply, discouraging investment in the sector and removing all federal promotion in the area.
The increase in demand combined with a reduction in supply translates into an immediate increase in prices. At the same time, the rise in fuel prices is automatically passed on to the prices of mass consumer goods, such as foodstuffs.
To confirm Levin’s prediction, it is enough to observe what happened during the last decades in Latin American economies, which were plagued by leftist policies with promises of income redistribution, which implied excessive public spending financed with taxes on the productive sectors, which finally transferred their tax costs to prices, generating an uncontrollable inflationary spiral, followed by misery and structural poverty. The question is: Where is the United States headed?