A trip to the grocery store, gas station or just about anywhere else is guaranteed to give you a bad case of sticker shock these days. Prices just keep going up, and there’s no end in sight to this inflationary wave. If a household’s budget was tight at the start of the year, it is now very likely underwater, and families are drowning under higher prices, the detritus of the hidden tax — inflation.
Prices in September were 5.4% higher than the year before, according to the Consumer Price Index.
To add insult to injury, these price increases did not have to happen; they are the result of misguided policy, largely at the federal level. And who bears the brunt of those injudicious decisions? We all do, but the poorest among us tend to be hit the hardest.
It is little comfort that the Federal Reserve (Fed) has been telling the country that inflation is transitory. Not only does that adjective seem inappropriate, it also makes light of the financial pain of families facing higher prices everywhere they turn. A quick look at the prices of a few items shows just how much pressure inflation is putting on people.
Energy is 25% more expensive than a year ago. That is not something those with low incomes can avoid. Everyone needs to heat and cool their homes, power their refrigerators, and keep the lights on. It does not matter if you are wealthy or poor, your gasoline is still 43% more expensive than a year ago.
Beef prices are up 18% and bacon has increased 19%. Other food items, like eggs, which are purchased disproportionately by lower-income households, are also rising faster than other prices, climbing 13% in just a year.
Similarly, while new vehicle prices have risen 9%, the prices for used cars and trucks is up 24%. Once again, those with low and fixed incomes are more likely to buy used vehicles, not new ones. And if you need a clothes washer and dryer, be prepared to spend 19% more than you would have last year.
Conversely, those with high incomes are more likely to have assets (like a house) whose prices also rise, so they are slightly better able to weather the storm of inflation, although even they are hit by this nefarious tax.
At this rate, the country can expect prices in December to be more than 6% higher than at the beginning of the year. That means the federal government will have successfully confiscated 6% of the value of every dollar held by every citizen in the country in just a year. Without a single vote in Congress, the Fed will have quietly accomplished levying a heavy tax on the entire country, and most people will be none the wiser.
Since the Fed alone causes inflation, it alone can put the brakes on this hidden tax. The Fed must stop purchasing bonds, because that is the chief method by which the Fed has been adding liquidity to the financial system. This additional liquidity dilutes the purchasing power of existing dollars, functioning as a hidden tax. While the process is largely accomplished electronically in this digital age, it is the equivalent of running a printing press and churning out excess dollars. That needs to end — immediately.
However, if the Modern Monetary Theorists get their way, the printing presses will just roll on, and “transitory” inflation will last forever.
E.J. Antoni, Ph.D., is an economist at Texas Public Policy Foundation and a Visiting Fellow at Committee to Unleash Prosperity.