Ukrainian President Volodymyr Zelensky addressed Congress Dec. 21, 2022. Credit: Nancy Pelosi / Twitter
While inflation continues to weigh heaviest on the most vulnerable Americans, a $1.7 trillion spending bill, unveiled on Dec. 20 by Congress, includes more than $44 billion in emergency aid for Ukraine.
Repeatedly downplaying the threat of inflation has reduced the credibility of the White House, the Federal Reserve and other forecasters, wrote Brian Riedl, a senior fellow at the Manhattan Institute.
Democrats in Congress cheered as the U.S. renewed its commitment to defend the Eastern European country against neighboring Russia with a visit Wednesday by the Ukrainian president.
According to a new poll from the Chicago Council on Global Affairs, support is declining amongst Republicans for more U.S. aid to Ukraine. Some prominent GOP politicians and media personalities have expressed opposition, CNN reported.
Volodymyr Zelensky posed for photos with House Speaker Nancy Pelosi during his first known trip outside Ukraine’s borders since Russia’s invasion in February as the one-year anniversary of the war approaches.
As of October 2022, the U.S. had committed more than $18.2 billion in security assistance to Ukraine since January 2021, creating boom times for weapons manufacturers and defense contractors such as Lockheed Martin, the largest U.S. military contractor.
Meanwhile, inflation is costing U.S. households an extra $10,000 a year, Riedl wrote. American families headed into the holiday season with the price of food up 10.6 percent compared to a year ago, gas and energy prices up 13.1 percent, and transportation, including car prices, up 14.2 percent, according to the November CPI report from the Department of Labor.
Wealth inequality expert Dr. William “Sandy” Darity recently called out how inflation and the Fed’s efforts to fight it through interest rate hikes and other methods disproportionately hurt Black Americans.
Black Americans have always experienced higher unemployment and lower wealth than their white counterparts, Darity argued in a response to a Brookings article.
“I contend that the impact on racial inequality is more unsettling when the Federal Reserve pursues tight monetary policy when inflation is present or imminent than when the Federal Reserve pursues loose interest rate policy to stimulate the economy,” Darity wrote.
“It is clear that a (Paul) Volcker-style aggressive use of the Federal Reserve’s traditional instruments for fighting inflation can produce a savage downturn, with harmful effects for most Americans, but disproportionately so for Black Americans.”
The consumer price index rose 0.1 percent in November, bringing the 12-month rate to 7.1 percent. President Joe Biden ignored economist warnings in early 2021 that the $1.9 trillion stimulus bill could result in inflation in a supply-constrained economy, Riedl wrote in a New York Post column. “Then we were told that inflation was ‘transitory,’ a relic of corporate price gouging and ‘Putin’s price hike,'” Reidl added.
The Federal Reserve also downplayed inflation, predicting two years ago that inflation would be 1.8 percent in 2021. It was 5.8 percent. In 2022, the Fed projected that inflation would fall to 2.6 percent. It is now expected to be 5.6 percent at the end of the year. “So here we are again, with the (Fed’s Federal Open Market Committee or FOMC) projecting inflation rates of 3.1%, 2.5%, and 2.1% over the next three years,” Riedl wrote.
Even a more normalized inflation rate won’t cancel the higher price of the past two years, Riedl wrote. “Since Biden took office, the cumulative 13.8% inflation is roughly 10% higher than the baseline rate. This has cost the typical household approximately $10,000 over two years,” he wrote.
Darity suggested the government create a federal job guarantee as a form of social insurance to help balance the effects of Fed monetary policy.
“From the standpoint of the Black community, inflation can have disproportionate adverse effects,” Darity wrote. “However, a recession induced by the Federal Reserve’s anti-inflation measures also is likely to have disproportionate adverse effects on Black Americans, for example, the racial wage gap widens as Black compensation falls more than white compensation.”
“If we want to unbridle the Federal Reserve’s inflation-fighting capabilities, we must minimize the repercussions of an economic downturn. A federal job guarantee is essential toward that end,” Darity concluded.
