The Biden Administration and progressive thought leaders, such as Paul Krugman and even Rob Schofield, from N.C. Policy Watch, have been bending over backward at the beginning of 2022 to defend the administration’s economic record and downplay the significance of skyrocketing inflation. 

And it’s no wonder — President Biden is receiving full blame for the state of the economy. According to a Jan. 25 Economist/YouGov poll, 51% of American citizens disapprove of Biden’s handling of jobs and the economy. In the same survey, when asked if unemployment or inflation is the more important threat to the economy, 46% answered inflation, compared to 10% with unemployment. 

There lies our most significant economic challenge, not just inflation, but inflation with low consumer confidence. 

Inflation is the reduction in the value of money reflected in a general increase in the price of goods and services. It is a significant problem for American families and the overall economy, as the federal Labor Department reported that prices increased at an annual rate of 7% in December. That is the fastest inflation rate since Ronald Reagan’s first term as president. 

Why is inflation a problem? Well, Margaret Thatcher, speaking about four years before she became British prime minister, said it very well in a 1975 speech. Speaking on inflation, Thatcher said, “It is threatening to destroy not just the relative prosperity to which most of us have become accustomed, but the savings and plans of each person and family and the working capital of each business and other organization.” 

In other words, if the price of goods and services far outpaces wage growth and savings interest, then the average American family is poorer even though nothing in their life has changed. This inflation makes our nation and society less prosperous and devalues the labor of the American family. The American Dream is becoming more distant for so many. 

So why is inflation so high? There are two unequal pieces to this puzzle. 

First, there is a global supply chain crisis. Labor shortages caused by labor strikes and COVID-19, in addition to trade tariffs, have slowed the flow of goods across the world, leading to product scarcity, and thereby, price increases. By way of illustration, a November 2021 Civitas Poll found that 61% of North Carolina voters noticed a shortage of meat, dairy, and eggs in their grocery store in 2021. 

Second, with the backing of both sides of the aisle, the federal government has injected more than $4 trillion in COVID-relief funds into the American economy. While this temporarily increased the buying power of some American consumers, the combination of a spike in demand while supply was already low led to a massive inflation spike. This inflation spike is now causing American consumers to have less buying power than before. 

Of course, all of this is happening as the national labor force participation rate has not recovered to pre-COVID levels, and congressional Democrats are seeking to throw another $3 trillion into the economy through Build Back Better. It is no wonder American consumer confidence is now at its second-lowest point in the past decade, only just above April 2020, when the COVID shutdowns began. 

In other words, don’t believe the spin from the left that the economy is OK and inflation isn’t a big deal. It is a huge deal. 

I quoted Thatcher earlier, from a 1975 speech entitled, “Inflation is Caused by Governments.” Right now, America needs a Thatcher — rock-ribbed leader who understands the role of government and dedicated to fighting inflation with economic stability. Unfortunately, the party currently in charge of Washington, D.C. seems to ignore the threat and spend their way through it. 

 Donald Bryson is president and chief strategy officer for the John Locke Foundation. 

This article first appeared in the Feb / March print edition of Carolina Journal.