Yellen Admits ‘The Spending That We Did’ Is Contributing To Inflation

Biden Administration Officials Are Finally Admitting That ‘[W]e Are Going Through A Period Of Inflation That’s Higher Than Americans Have Seen In A Long Time’ And That This Inflation Has Been Fueled By Their Massive Spending Program

TREASURY SECRETARY JANET YELLEN: “[W]e are going through a period of inflation that’s higher than Americans have seen in a long time. And it’s something that’s obviously a concern and worrying them.… And, remember, the spending that we did that partially has caused this high demand for goods, it’s been very important in making sure that the pandemic hasn’t had a scarring effect on American workers.” (CNN, 10/24/2021)

• YELLEN: “Americans haven’t seen inflation like we have experienced recently in a long time.” (CNN, 10/24/2021)

COMMERCE SECRETARY GINA RAIMONDO: “It’s hard. It’s tough for Americans right now to see prices going higher, goods not getting to them as quickly.” (“CNN Newsroom,” 10/19/2021)

FLASHBACK: As Democrats Were Rushing Through Their Partisan Spending Plan Earlier This Year, They Dismissed Warnings About It Setting Off Inflation

“[Former Treasury Secretary Larry] Summers has been warning that Biden’s $1.9 trillion stimulus package is too big and will overheat the economy, spurring inflation that could prove hard for the Federal Reserve to control. White House officials have routinely dismissed Summers’s concerns and in private express frustration with his attacks...” (“Biden Privately Called Lawrence Summers, A Critic Of White House Agenda, To Discuss Economy,” The Washington Post, 6/03/2021)

CNN’s POPPY HARLOW: “Larry Summers, your friend, you worked with him for a long time, he’s got some pushback here. He writes in ‘The Washington Post,’ the proposed Biden stimulus is three times as large as the projected shortfall. He also warns of two big things. He says inflationary pressure of a kind we have not seen in a generation could come because of this plan with consequences of -- for the value of the dollar and financial stability. Are you sure he’s wrong?”
WHITE HOUSE ECONOMIC ADVISOR JARED BERNSTEIN: “I think he’s wrong. I think he is wrong in a pretty profound way about that -- about that claim in the following sense. And there’s a way in which Larry’s offering a warning that we’ve actually already heeded. So let me get into this a little bit. … But what Larry is worrying about here is inflation overheating. And right now we have inflation that’s been below the Fed’s target rate of 2 percent for well over a decade. And so we also have tremendous unused capacity in this economy. … That’s not overheating. It doesn’t mean there won’t be some heat. And where Larry got something importantly wrong, by the way, is by suggesting that the administration was being dismissive of any inflation -- potential inflationary pressures.” (CNN, 2/05/2021)

REPORTER: “Speaker Pelosi, did President Biden comment on the criticism from Larry Summers that there is a risk of going too big here?”
HOUSE SPEAKER NANCY PELOSI (D-CA): “No, we didn’t talk about Larry Summers.” (Speaker Pelosi, Press Conference, 2/05/2021)

SEN. BRIAN SCHATZ (D-HI): “Why would we listen to the economist who admits he went too small last time if he’s warning us to go small again?” (Sen. Schatz, @brianschatz, Twitter, 2/05/2021)

A New Study By The Federal Reserve Of San Francisco Also Concludes That Democrats’ $1.9 Trillion Partisan Spending Bill Boosted Inflation

“Inflation is likely getting a temporary boost from the $1.9 trillion coronavirus relief package that the Biden administration ushered in early this year, new Federal Reserve Bank of San Francisco research released on Monday suggested…. The economists estimated that it would add 0.3 percentage points to the core Personal Consumption Expenditures inflation index in 2021 and ‘a bit more’ than 0.2 percentage points in 2022.” (“A Regional Fed Analysis Suggests Biden’s Stimulus Is Temporarily Stoking Inflation.,” The New York Times, 10/18/2021)

• “The later timing and large size of the A.R.P. stirred debate about whether it is causing an overheating of the economy and fueling a sustained increase in inflation,’ the San Francisco Fed researchers noted. The economists tried to answer that question by looking at how much spare capacity is in the economy using a labor market measure — the ratio of job openings to unemployment. The logic is that inflation tends to pick up when there is very little labor market slack, because businesses raise wages to attract workers and then raise prices to cover their climbing labor costs. Government stimulus can push up the number of job openings in the economy as it fuels demand while constraining the number of available workers because it gives would-be employees a financial cushion, allowing them to take their time as they search for a new job. Based on the package’s size and using historical evidence on how fiscal spending affects the labor market, the researchers found that the American Rescue Plan might raise the vacancy-to-unemployment ratio close to its historical peak in 1968, fueling some inflation …” (“A Regional Fed Analysis Suggests Biden’s Stimulus Is Temporarily Stoking Inflation.,” The New York Times, 10/18/2021)

Other Fed Officials Are Beginning To Acknowledge That Inflation Is A Bigger Problem Than They Previously Claimed

FEDERAL RESERVE CHAIRMAN JEROME POWELL: “Supply-side constraints have gotten worse…. The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.” (“Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” The Wall Street Journal, 10/22/2021)

• “Federal Reserve Chairman Jerome Powell indicated he is now somewhat more concerned about higher inflation and said that the central bank would watch carefully for signs that households and businesses were expecting sustained price pressures to continue…. Inflation has soared this year, with ‘core prices’ that exclude volatile food and energy categories, the Fed’s preferred gauge, up 3.6% in August from a year earlier…. Inflation data and a surge in energy prices since September point to some broadening in price pressures …” (“Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” The Wall Street Journal, 10/22/2021)

The President Of The Federal Reserve Bank Of Atlanta: Inflation Is ‘Not Transitory’

“Federal Reserve Bank of Atlanta President Raphael Bostic said this year’s inflation surge is lasting longer than policymakers expected, so it’s not appropriate to refer to such price increases as transitory. ‘Transitory is a dirty word,’ Bostic said in a virtual speech to the Peterson Institute for International Economics on Tuesday. He spoke with a glass jar labeled ‘transitory’ at his side, depositing $1 each time he used the ‘swear word,’ as it’s become known to him and his staff over the past few months.” (“Transitory Is ‘Dirty Word’ as Inflation Lasts, Fed’s Bostic Says,” Bloomberg, 10/12/2021)

FEDERAL RESERVE BANK OF ATLANTA PRESIDENT RAPHAEL BOSTIC: “It is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply-chain disruptions — will not be brief… By this definition, then, the forces are not transitory.” (“Transitory Is ‘Dirty Word’ as Inflation Lasts, Fed’s Bostic Says,” Bloomberg, 10/12/2021)

“U.S. inflation is above the Federal Reserve’s 2% inflation target and policymakers need to watch carefully to ensure that pandemic-induced pressures do not cause long-term inflation expectations to become unanchored, Atlanta Fed Bank President Raphael Bostic said [in August].” (“Fed’s Bostic Says Pandemic Pressures Pose Risks For Long-Term Inflation Expectations”, Reuters, 8/12/2021)

Yet Democrats Are Plowing Ahead With An Even Larger Multitrillion Reckless Taxing-And-Spending Spree That Experts Say Could Stoke Inflation Even Further

“In negotiating a slimmed-down, front-loaded version of his Build Back Better agenda, President Joe Biden could end up worse off on two fronts: The 10-year program will likely be less economically transformative than he once hoped, while still running the risk of stoking inflation in the shorter term…. The bunching up of the spending in the early years could have downsides in the shorter term as well -- by pumping demand into an economy that in many ways is already straining at its limits, as evidenced by widespread supply bottlenecks and rising price pressures. That danger is compounded by the likelihood that the plan’s ‘pay-fors’ -- tax increases that could inhibit investment -- will be back-loaded, no matter what shape they finally take.” (“Bidenomics Risks Inflation Push With Spend-Now, Pay-Later Draft,” Bloomberg News, 10/22/2021)

“The … preference to spend upfront on a raft of short-term programs, rather than fully finance a select few measures over the next decade, sows inflation risk, according to former Congressional Budget Office Director Douglas Holtz-Eakin. Holtz-Eakin, now head of the conservative American Action Forum, sees consumer prices rising at about a 4% clip next year, with the risks tilted to the upside. That compares with the median estimate of 3.3% in a Bloomberg survey -- itself an elevated figure relative to recent years.” (“Bidenomics Risks Inflation Push With Spend-Now, Pay-Later Draft,” Bloomberg News, 10/22/2021)

‘Right Now Anything That Expands Aggregate Demand Is Not Warranted, Not Advisable’

JPMORGAN CHASE CHIEF U.S. ECONOMIST MICHAEL FEROLI: “Right now anything that expands aggregate demand is not warranted, not advisable…. The economy seems to be operating pretty close to its capacity constraints.” (“Bidenomics Risks Inflation Push With Spend-Now, Pay-Later Draft,” Bloomberg News, 10/22/2021)

‘This Will Contribute To Inflation’

SEN. JOE MANCHIN (D-WV): “This will contribute to inflation. We’ve already passed the American Rescue Plan. We should just pass the infrastructure bill and, you know, pause for six months.” (“Scoop: ‘How About Zero?’ Manchin, Sanders Get Heated Behind Closed Doors,” Axios, 10/21/2021)

Democrats’ Big-Spending Agenda Is Focused Only On Pleasing The Far Left, Despite Independent Voters Saying Their Top Concern Is Inflation And The Economy: ‘The Conversation In Washington Doesn’t Match The Conversation That’s Happening Around The Country’

“[Joel] Benenson [who served as Barack Obama’s pollster in the 2008 and 2012 presidential elections] has teamed up with Neil Newhouse, a co-founder of Public Opinion Strategies, a GOP polling firm, on a research project warning that Democrats are heading into next year’s midterm elections amid echoes of Obama’s first two years in office that resulted in a resounding defeat in the 2010 midterms that cost the party its House majority…. At the heart of the Benenson-Newhouse research is something Democrats worried about a dozen years ago, when those messy [Obamacare] negotiations took up so much bandwidth yet were also out of sync with what many swing voters prioritized. In late 2009 and early 2010, with unemployment hovering around 10 percent, key swing voters cared most about jobs and not expanding access to health insurance. Today’s voters appear to be most concerned about the ongoing global pandemic and are not deeply invested in the haggling over proposals such as expanding Medicare coverage to include dental, hearing and vision benefits.” (“Democrats’ Problem Is Not Focusing On Issues Most Vital To Independents, 2 Prominent Pollsters Say,” The Washington Post, 10/23/2021)

“‘The conversation in Washington doesn’t match the conversation that’s happening around the country,’ Newhouse said during a 45-minute telephone interview with Benenson.” (“Democrats’ Problem Is Not Focusing On Issues Most Vital To Independents, 2 Prominent Pollsters Say,” The Washington Post, 10/23/2021)

• “The mismatch between some of Biden’s plans and the salient economic concerns of the moment was visible at a CNN town hall in Baltimore Thursday night. The president heard questions on high fuel costs, supply chains and inflation …” (“Bidenomics Risks Inflation Push With Spend-Now, Pay-Later Draft,” Bloomberg News, 10/22/2021)

“In their survey of more than 2,600 likely voters, the pollsters asked respondents to cite their three most important issues. Democratic voters chose climate change, pandemic recovery and ‘raising taxes on the rich’ as their most important issues, closely followed by ‘health insurance coverage/costs.’ And now Democrats in Washington are crafting a multitrillion-dollar agenda that focuses on expanding access to health care, battling climate change and providing better child care, all financed by taxing the wealthy. But that menu does not quite match the interests of independent voters, who chose ‘economy/inflation/jobs’ as their top concern, with ‘immigration and border security’ close behind and then ‘covid-19 pandemic recovery.’” (“Democrats’ Problem Is Not Focusing On Issues Most Vital To Independents, 2 Prominent Pollsters Say,” The Washington Post, 10/23/2021)

• “[Suburban swing] voters also are keenly afraid of inflation and are concerned about whether massive federal spending — Congress approved more than $5 trillion of pandemic emergency spending from March 2020 to March 2021, with trillions more proposed by Biden for infrastructure and social programs — has fueled rising costs. Republican candidates will note that 71 percent of independent voters agreed with this statement: ‘People will continue to pay more money on everyday expenses unless the government becomes more fiscally responsible.’” (“Democrats’ Problem Is Not Focusing On Issues Most Vital To Independents, 2 Prominent Pollsters Say,” The Washington Post, 10/23/2021)

• “[Independents] are turning away from Biden and his agenda: 70 percent of independent voters said the country was headed in the wrong direction, according to the seven-page memo the pollsters wrote for Center Forward.” (“Democrats’ Problem Is Not Focusing On Issues Most Vital To Independents, 2 Prominent Pollsters Say,” The Washington Post, 10/23/2021)

Meanwhile, Inflation Is Hitting Americans In All Sorts Of Different Ways, From More Expensive Thanksgiving Food To Fewer Holiday Discounts And ‘Stealth Tax Increase[s]’

“Ellen Zentner, chief U.S. economist at Morgan Stanley, has highlighted that price increases have been outpacing wage gains. ‘If sustained, this relationship would threaten to erode consumer buying power,’ she wrote in a recent note.” (“Bidenomics Risks Inflation Push With Spend-Now, Pay-Later Draft,” Bloomberg News, 10/22/2021)

‘This Year’s Thanksgiving Feast Will Wallop The Wallet’

“Thanksgiving 2021 is shaping up to be the most expensive meal in the history of the holiday…. Nearly every component of the traditional American Thanksgiving dinner, from the disposable aluminum turkey roasting pan to the coffee and pie, will cost more this year, according to agricultural economists, farmers and grocery executives. Major food companies like Nestlé and Procter & Gamble have already warned consumers to brace for more price increases. There is no single culprit. The nation’s food supply has been battered by a knotted supply chain, high transportation expenses, labor shortages, trade policies and bad weather. Inflation is at play, too. In September, the Consumer Price Index for food was up 4.6 percent from a year ago. Prices for meat, poultry, fish and eggs jumped drastically, by 10.5 percent.” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

• “For many cooks, the biggest expense will be the turkey. By the end of the year, market analysts say, prices per pound will likely surpass the record Department of Agriculture benchmark price for turkeys — $1.36, set in 2015. Turkey is more expensive largely because the price of corn, which most commercial turkeys feed on, more than doubled in some parts of the country from July 2020 to July 2021. Whole frozen birds between eight and 16 pounds already cost 25 cents a pound more than they did a year ago, according to the weekly Department of Agriculture turkey report released on Friday.” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

• “Packaged dinner rolls will be pricier because the cost of almost all of the ingredients that commercial bakers use has gone up. Canned cranberry sauce will cost more because domestic steel plants have yet to catch up after pandemic shutdowns, and China is limiting steel production to reduce carbon emissions. As a result, steel prices have remained more than 200 percent higher than they were before the pandemic.” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

• “The heftier price tag on that turkey-friendly California pinot noir reflects a 25 percent surge in energy costs, expensive delays related to labor shortages and the cost of glass bottles stuck on cargo ships coming from China.” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

‘Everything You Go To Order, Either You Can’t Get It, Or You Shake Your Head And Go, “How Much?”’

“Caroline Hoffman is already stashing canned pumpkin in the kitchen of her Chicago apartment when she finds some for under a dollar. She recently spent almost $2 more for the vanilla she’ll need to bake pumpkin bread and other desserts for the various Friendsgiving celebrations she’s been invited to. Matthew McClure paid 20 percent more this month than he did last year for the 25 pasture-raised turkeys he plans to roast at the Hive, the Bentonville, Ark., restaurant where he is the executive chef. And Norman Brown, director of sweet-potato sales for Wada Farms in Raleigh, N.C., is paying truckers nearly twice as much as usual to haul the crop to other parts of the country. ‘I never seen anything like it, and I’ve been running sweet potatoes for 38 or 39 years,’ Mr. Brown said. ‘I don’t know what the answer is, but in the end it’s all going to get passed on to the consumer.’” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

“Even the basic materials — like wooden pallets and cardboard containers — that farmers need to get their crops from the field to distributors are either hard to find or much more expensive. ‘Everything you go to order, either you can’t get it, or you shake your head and go, “How much?”’ said Jim Kent, an owner of the 100-acre Locust Grove Fruit Farm in Milton, N.Y.” (“This Year’s Thanksgiving Feast Will Wallop The Wallet,” The New York Times, 10/25/2021)

‘Shoppers Find Discounts Are in Short Supply This Holiday Season’

“Industry executives and analysts say consumers should expect to pay closer to full price on a range of products this holiday season, including on Nike sneakers, Coach handbags and Ralph Lauren Polo shirts. Several factors are behind the dearth of deals, including backed-up supply chains, inflation and steps retailers are taking to price their products more efficiently, executives and analysts say.” (“Shoppers Find Discounts Are in Short Supply This Holiday Season,” The Wall Street Journal, 10/25/2021)

• “The average discount percentage for men’s apparel purchased over the Labor Day weekend through Brad’s Deals, an online discount marketplace, was 54% this year, compared with 71% a year ago. For shoes, discounts declined to 51% this year, from 62% last year. And sports, fitness and camping gear was discounted on average 31% this year, compared with 50% last year. Each of those categories was also less promotional this year compared with 2019.” (“Shoppers Find Discounts Are in Short Supply This Holiday Season,” The Wall Street Journal, 10/25/2021)

• “BMO Capital Markets analyst Simeon Siegel said there will be a dichotomy to discounting this year. ‘Shoppers will have to spend up for the hot items, but will find deals on items that get left behind,’ Mr. Siegel said…. For the first few weeks of October, the percentage of items on sale in aggregate at a handful of brands he tracks declined 5% compared with the same period last year. Nike and Adidas products sold at Foot Locker had the biggest reduction in promotions, with discounts roughly 30% lower at both brands. Coach, Ralph Lauren and Michael Kors items sold at Macy’s also had lower discount rates.” (“Shoppers Find Discounts Are in Short Supply This Holiday Season,” The Wall Street Journal, 10/25/2021)

‘Every Time I Go To The Store, The Prices Are Higher, Which Is Cutting Into The Budget,’ ‘‘Even If There Is A Sale, Anything You Want Is Out Of Stock Or On Back Order’

“‘I’m definitely going to buy less this year,’ said Michelle Keldgord, who lives in Redlands, Calif. ‘Every time I go to the store, the prices are higher, which is cutting into the budget.’ The 28-year-old blogger said she is considering taking her two children to Disneyland for Christmas this year instead of buying gifts, since she has had trouble finding the items on her list.” (“Shoppers Find Discounts Are in Short Supply This Holiday Season,” The Wall Street Journal, 10/25/2021)

“Ryan Zamo is a bargain hunter. But the 32-year-old owner of an organic-skin-care company said she isn’t finding many deals this year. ‘Even if there is a sale, anything you want is out of stock or on back order,’ said the Los Angeles resident.” (“Shoppers Find Discounts Are in Short Supply This Holiday Season,” The Wall Street Journal, 10/25/2021)

As Inflation Rises, More Americans Will Get Hit With ‘Stealth Tax Increase[s]’

“As inflation trends near a 13-year high … Some home sellers … will be squeezed because married couples can exclude up to $500,000 in gains from capital-gains taxes. That figure hasn’t changed since a 1997 law, while the median home sale price has more than doubled since then.” (“High Inflation Creates Tax Winners and Losers. What Are You?,” The Wall Street Journal, 10/23/2021)

“People encountering a tax provision that isn’t indexed for inflation—such as the $3,000 limit on deductible capital losses against ordinary income, a $25,000 income-tax exclusion for Social Security benefits or that $500,000 cap on tax-free home sales—will be hurt more during a period of higher inflation as those benefits erode faster.” (“High Inflation Creates Tax Winners and Losers. What Are You?,” The Wall Street Journal, 10/23/2021)

• “Setting a dollar cap and leaving it unchanged can operate as a stealth tax increase—over a long time when inflation is low and a shorter time when it is high.” (“High Inflation Creates Tax Winners and Losers. What Are You?,” The Wall Street Journal, 10/23/2021)

• “For example, a 2010 law included new taxes on investments and wages that take effect when income reaches $200,000 for individuals and $250,000 for married couples, matching levels that then-President Barack Obama had set during his campaign. More people pay those taxes now than they did then …” (“High Inflation Creates Tax Winners and Losers. What Are You?,” The Wall Street Journal, 10/23/2021)