Biden spending spree gut check: inflation is waaay up

Concerns about creeping inflation sparked by President Joe Biden’s rampant spending sprees were bolstered this week, as it was reported that a key indicator of economic overheating rose in April at a higher rate than was predicted by forecasters, according to the Washington Examiner.

Specifically, the Commerce Department announced that though the personal consumption expenditures index (PCE) was expected to rise by 2.9%, the numbers for April actually revealed an increase at a pace of 3.1%, which is a greater leap than that recorded in March. According to the New York Post, the month-over-month rise was the highest on record since October of 2001, and the 12-month change is the largest seen since the summer of 1992.

Adding to escalating concerns were the figures from the Labor Department regarding the Consumer Price Index, another key inflationary gauge. Earlier in May, it was revealed that consumer prices rose for the year ending in April by 4.2%, with costs across the economic spectrum showing notable increases.

While the Federal Reserve reportedly anticipated this level of inflation for the time being, officials there also seem to view it as a temporary phenomenon unlikely to result in any major policy shifts.

The Post quoted senior global investment analyst at Commonwealth Financial Network, Anu Gaggar, who said that the jarring year-over-year numbers are probably artificially distorted due to the fact that at this time in 2020, much of the economy was locked down, which led to a drop in prices.

Gaggar further opined that while certain types of prices increases are likely transitory in nature and will dissipate once the economy hits its stride over the coming months. There may be other categories, however, in which rises may be more permanent.

With that said, there remain other economists sounding the alarm about what they believe are worrisome trends in the midst of massive federal spending, including former Treasury Secretary Larry Summers who worked in the administrations of Presidents Bill Clinton and Barack Obama.

In a recent Washington Post op-ed, Summers declared, “This is not just conjecture. The consumer price index rose at a 7.5% annual rate in the first quarter, and inflation expectations jumped at the fastest rate since inflation indexed bonds were introduced a generation ago.” He also argued that the Biden administration’s COVID-19 relief spending outstripped what he called the “output gap,” a measure of the gulf between the economy’s present production and its potential.

Noting that massive amounts of federal spending via stimulus packages would assuredly lead to price increases, Summers warned that the worst toll would almost certainly be taken on those consumers least prepared to withstand it. Time will tell whether his predictions or those with a more tempered view of the long-term effects of these economic harbingers will ultimately prove correct.