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Prices are rising almost everywhere these days, and inflation is now a real & growing concern. Three points to remember on this:

 

1️⃣ First, everywhere you see higher prices, there are likely several factors. For example, our grocery and food prices are certainly on the way up. Adverse weather, the fact that we’re exporting more to other nations, an uptick in travel (40% of our corn production goes to ethanol), higher feed & fertilizer prices, and labor shortages are among the many reasons why it’s costing grocery stores more to stock their shelves. That’s all passed along to us, the consumers.

 

Or look a lumber prices, which are ~400% higher than they typically are this time of year. Many sawmills had to scale back during the pandemic, but lumber demands from new construction and home improvements came roaring back before those mills were able to return to normal operations. So now we have backlogs at these sawmills which, in part, have caused lumber prices to skyrocket.

 

2️⃣ The second thing to remember about inflation is that big government is going to make it worse. It always does. President Biden and congressional Democrats are trying to borrow & spend an additional $6 trillion beyond what the federal government normally needs to operate. A lot of that is on liberal wish-list efforts unrelated to the pandemic.

 

In almost every sector of our economy, a post-pandemic recovery is already underway. So for the federal government to pump trillions of additional, unnecessary spending into the mix is a recipe for inflation because this extra $6 trillion will be competing for the same resources (e.g. labor, materials, etc.) that the private sector needs to continue its recovery. That’s going to jack up the price of most everything! This is very foolish given where our economy is right now, and many economists on both sides of the aisle are sounding the alarm bells on this.

 

3️⃣ The third point is the most important: inflation disproportionally hurts people who earn less money. It’s a regressive tax, of sorts.

 

In other words, when the cost of living goes up due to inflation, it can be significantly harder for those who earn less to absorb the increases. (Much more so than higher income earners.) This cannot be solved by mandating higher wages, as many liberals argue, since it could lead to a spiraling cycle of inflation.

 

🔺 Bottom line: inflation disproportionally hurts lower income Americans. Government can try to help the situation, but there’s real concern that Biden and the Democrat majority in Congress will end up making this situation worse. Let’s hope not, but there is serious cause for concern here.