Fiscal Conservatism Is Still Best Way to Beat Inflation

Fiscal Conservatism Is Still Best Way to Beat Inflation


President Joe Biden counterintuitively argues that his proposed massive increases in government spending are the keys to beating back inflation, which hit 5.4% last month, and contends that “no serious economist” thinks unchecked inflation is on its way.

According to his own advisers, Biden is wrong on both counts. Treasury Secretary Janet Yellen on July 15 said she expects “several more months of rapid inflation.” Meanwhile, Larry Summers, who served as Treasury Secretary under President Bill Clinton, has said there is a 2-in-3 chance we’re heading toward severe inflation-related economic pain.

Americans are also concerned with Biden’s economic crisis. One recent poll found about 70% of respondents are worried that Biden’s spending plans could lead to inflation, and another survey found that 83% of Americans noticed price increases in June and July.

Their concerns are well-founded.

Almost half of small businesses have already said they’re raising prices to keep up with rising costs. Those higher prices are here to stay for hardworking families, as it’s rare that prices across the board ever deflate after rising.

Despite those economic rumblings, congressional Democrats have made clear they intend to double down on their tax-and-spend agenda that’s fueling inflation.

Take House Speaker Nancy Pelosi, D-Calif., and Biden’s $2 trillion American Rescue Plan as an example.

Democrats said that states would face bankruptcy without hundreds of billions in federal funds. Four months later, we now know that was a lie. In my state of Kansas, we ended fiscal year 2021 with nearly $2 billion in the bank.

The left used smoke, mirrors, and the mainstream media to hide the fact that the American Rescue Plan was actually a federal bailout for mismanaged liberal states and cities. The Wall Street Journal opined back in February:

California already has tax revenue coming in above its pre-pandemic level … but it will receive another $27 billion from federal taxpayers, or 17% of the state’s entire general fund revenue.

Pennsylvania will receive $7.1 billion, or 20% of its tax revenue.

You won’t hear this from most governors, who still want a handout from the feds. But the telltale sign is that many of the most spendthrift politicians are making no effort to cut spending or reform their governments.

This is all part of the left’s new economics. The goal is not growth and prosperity, but to reward left-leaning organizations and politicians with federal payoffs.

As a result, American families will now have to deal with higher prices and less economic growth. In July 2020, the Congressional Budget Office predicted growth would average 2.1% between 2023 and 2030. With Biden in office, the CBO has now had to lower that by almost one-third, to 1.5%.

Biden and his left-wing allies have declared war on math and fiscal sanity. They are playing a dangerous game that won’t end well for American families.

Currently, inflation is especially volatile because so much of our economic policy (i.e., low interest rates and excessive borrowing) is based on a belief that runaway inflation is no longer possible.

That presents those of us who care about being good stewards of taxpayer funds with an urgent imperative—and a policy and political opportunity—to reassert a new era of commonsense fiscal conservatism. It’s time that we have a revival of spending sanity in Washington.

Thankfully, that revival has already started at the state level.

Today, you can see a stark difference between the economic performance of governors across the country. The eight leading states for jobs recovered are all led by Republican governors, while the 10 states with the highest levels of unemployment are all run by governors on the left.

As then-Kansas state treasurer, I didn’t have the luxury of talking a good game about restraint and then borrowing our way out of trouble. My colleagues in state government had to make hard choices, set priorities, and live within their means.

Washington would benefit immensely from this Kansas commonsense.

Many around the country have already learned that the best form of stimulus isn’t sleight of hand (describing everything as “infrastructure”), but restraint.

Keeping more dollars in the hands of American families, business owners, shoppers, and entrepreneurs is the best way to drive long-term, sustainable economic growth. That’s why I have called for across-the-board cuts to all nondefense spending and to discretionary spending not related to veterans.

The only way we’ll get spending under control is to cut it.

There are plenty of targets for smart savings. The Trump administration put forward a budget last year that contained nearly $2.7 trillion in savings—more spending reductions than any other administration in history. That’s a good place to start.

The Republican Study Committee showed how policymakers could balance the budget by cutting $14 trillion in spending and also return $16,000 in taxes to the average American household.

With inflation looming, Republicans have an opportunity to seize the high ground and protect our recovery and American families who are already feeling the pinch when they shop for groceries or fill their gas tanks.

We need to deliver a message loud and clear that living within our means is not austerity, and that the best plan for growth is an act of compassion for future generations.

The Daily Signal publishes a variety of perspectives. Nothing written here is to be construed as representing the views of The Heritage Foundation.


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About the Author

Tony Beasley
Tony Beasley writes for the Local News, US and the World Section of ANH.