Some people seem to be having a hard time connecting the dots between excessive government spending and inflation but the relationship is quite simple.
Inflation is too many dollars chasing too few goods and services (high school econ) and when the government spends more than it takes in, the Federal Reserve “prints” more money to cover the deficit. How many is too many? That is a function of the supply side – GDP.
In 2018 the government taxed 16% of GDP and spent 19%.
In 2019 the government taxed 17% of GDP and spent 21%.
In 2020 the government taxed 17% of GDP and spent 32% – the one-off covid emergency stimulus.
In 2021 the government taxed 18% of GDP and spent 31%. – so much for one-off; it’s the new baseline.
They are spending 53% too many dollars, while at the same time pursuing economic policies that constrain production of goods and services – our store shelves did not empty themselves.
Government spending was $4.4 trillion in 2019 and $6.8 trillion in 2021. Combined 2018 and 2019 spending was $8.4 trillion, and combined 2020 and 2021 spending jumped to $13.5 trillion.
That is $5 trillion (too many dollars) dumped onto a $20 trillion economy (not enough goods and services).
Historic first-ever Treasury Secretary Yellen said recently that the additional government spending was not inflationary. I don’t know which is worse, that she knows better and is lying or doesn’t know better and is still Treasury Secretary.
The U.S. has climbed to the #3 spot in the world in debt to GDP ratio (a bad thing); worse than Lebanon and closing in on Greece, the economic dumpster fire of Europe.
There is a way out, but Congress has to pass it and the idiot at 1600 Pennsylvania Ave. N.W. has to sign it.