Peach Tree Times

As the COVID-19 pandemic continues to knock the economy off course and spending plans in Washington pile up, necessities are becoming more unaffordable in the U.S. by the day, some observers note.

Amenities from food, to gas, to electricity are more expensive than they were before the pandemic, and the average American's wage has not increased to compensate. In addition, the nation's inflation problems are blamed by critics of President Joe Biden administration's plans to pump out trillions in federal funds.

As Democrats continue to debate the contents of Biden’s massive social welfare spending package, infighting could complicate a looming Oct. 31 deadline to pass the bill, according to the Washington Examiner.

Erik Randolph, director of research for the Georgia Center for Opportunity (GCO), self-described as independent and nonpartisan, echoed concerns about the tie between inflation and spending. 

"We know that large spending, especially deficit spending like that in this bill, will lead to inflation, impacting the poor and middle class," Randolph told Peach Tree Times. 

Washington policies were criticized during a recent Fox Business segment where financial commentator and former Donald Trump administration official Larry Kudlow said he believes increased government spending, like the one currently proposed, will negatively affect the economy.

“First, government spending brings government regulation,” Kudlow said. “This regulatory avalanche will choke off business activity of all kinds,” creating what he calls a “supply side obstacle.”

Kudlow also argues that increased entitlements will dampen productivity and reduce the incentive to work. This position is widely disputed in the working class communities of Millennials and younger, who point out that the aversion to certain jobs and industries is actually unlivable wages, draining corporate environments and poor work-life balance. 

The GCO analyst countered that those living paycheck to paycheck, or on fixed incomes, will be most hurt by the inflation.

At least one close adviser to Biden has indicated they do not think rising prices and inflation affect the average citizen. As reported by Fox News and others, Ronald Klain, Biden's chief of staff, shared a Harvard professor's tweet that called inflation a “high-class problem." 

"Retirees and low-income families will feel the increase in groceries and goods necessary for their families most, but it will impact choices for the middle class as well," Randolph said. 

In what they deem the “inflation tax,” the Wall Street Journal editorial board points out that “workers are paying the price” for increased costs since “real hourly earnings are down 1.9% since January.”

According to an Oct. 13 report from the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 5.4% over the last 12 months ending in September 2021. The consequence is increased costs of living everywhere for Americans. The CPI reported notable upticks over the past 12 months on items particularly important to average American households such as food (up 4.6%) and energy (up 24.8%).

The affects already can be observed in real time with supply disruptions causing cost-push inflation, Randolph continued, adding, "but deficit spending will add fuel to the fire with demand-pull inflation, where too much money will be chasing too few goods."

Economic commentators and analysts are concerned about the impact that increased, sizable government spending could have on the economy. A recent study published in the Cato Institute's Cato Journal concluded that reckless spending through increasing Americans' debts contributes to inflation and will cause numerous economic problems in the months and years ahead if nothing is done.

Biden argues this current period of rising inflation and price spikes is temporary, according to Reuters. 

A recent economic white paper by the Niskanen Center, a nonpartisan thinktank working to promote an open society, echoes concerns that increased government spending on entitlements and subsidies can lead to increased prices and what they call “cost disease socialism."

Steven Teles, Samuel Hammond and Daniel Takash wrote the September 2021 Niskanen paper where they acknowledge that although “soaring costs have blown a hole in the budgets of the working and the middle classes, offsetting the full benefits of a growing economy” some of the solutions proposed by progressive politicians such as “simply socializing the costs and blowing an equally large hole in the federal debt is not a sustainable alternative.”

Teles, Hammond, and Takash find “the root cause of escalating costs is overwhelmingly regulatory, rather than budgetary,” and that “shifting costs onto the public would not only fail to fix the underlying problem, it could also make cost disease substantially worse. This results in a “vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum.”

Sen. Joe Manchin (D-W.Va.) criticized the massive spending bill, urging lawmakers to "proceed with caution" in allowing more spending in Congress.

“Millions of jobs are open, supply chains are strained and unavoidable inflation taxes are draining workers’ hard-earned wages as the price of gasoline and groceries continues to climb," he said according to the New York Post.  

What policymakers should be working on—and what the public should be demanding—are ways to grow Americans' buying power to ensure they can support their families, according to Randolph. 

"Instead, we are seeing policies that undermine the value of the little money that many poor people have, not only making their circumstances worse but also making it harder for them to get ahead," he said.