Last week marked the two-year anniversary of declining real wages for ordinary American workers due to ongoing high inflation. The latest consumer price index, released last week, shows prices grew 20% faster than wages over the past 12 months.
This sad anniversary is the result of President Joe Biden and congressional Democrats’ reckless spending that has diluted the value of the currency already in existence.
The two-year decline in living standards for ordinary Americans proves once and for all that Democrats are America’s anti-worker party. Their easy fiscal and monetary policy, known as Modern Monetary Theory, has been wholly discredited by this prolonged erosion of the dollar’s value and workers’ quality of life.
Yet still, they demand more massive deficit spending that would put upward pressure on prices. For instance, Biden’s recently announced budget would raise the deficit from $1.4 billion in 2022 to $1.6 trillion in 2023 and $1.8 trillion in 2024. The total deficit would increase by $17 trillion over 10 years—more than the entire national debt held by the public before Covid-19.
Democrats refuse to negotiate any spending cuts in return for raising the debt ceiling, accepting the dangerous status quo of around $1 trillion wasted in debt interest payments each year.
While the mainstream media are promoting this month’s slowdown in the consumer price index, they ignore how inflation under Biden’s presidency is approximately 15%. Those on fixed incomes are one-sixth poorer today than when Biden took office. And core inflation actually increased compared with last month, demonstrating the inflation battle is far from won.
The worst may be yet to come. Under Biden’s nose, nations across the globe are rapidly replacing the dollar as their trading currency. One reason the U.S. has been able to print trillions of dollars without even faster inflation is that other countries inherently value the U.S. dollar as the world’s reserve currency. If they no longer need it to conduct their trade, demand for dollars will plummet along with its long-inflated value and American living standards. That could turn today’s high inflation hyper.
This threat is growing along with the economies of the BRICS nations (Brazil, Russia, India, China, and South Africa), whose combined gross domestic products recently overtook the Group of Seven nations’ for the first time.
Inflation also remains high enough to continue posing a severe threat to banks whose balance sheets are full of low-interest mortgage and Treasury debt. Who wants a 3% mortgage bond in an inflationary environment around twice as high? This dynamic threatens another Silicon Valley Bank-style run.
According to economist Peter Schiff, banks are rapidly selling their mortgage bonds. Sound familiar?
Small businesses face the one-two punch of elevated inflation and banks that have stopped lending to preserve liquidity. Small enterprises generally operate on thin profit margins that high inflation erodes. Small businesses can’t simply raise their prices in response because their consumers are price-sensitive. There’s only so much consumers are willing to pay for dry-cleaning and pizzas.
“Small businesses are struggling … [to] get the funds to grow, to hire, to buy the equipment that they need,” says Kryson Bratton, owner of Piper Whitney Construction in Houston, who can’t get credit to purchase a new tractor. According to the Federal Reserve, U.S. bank lending fell by the most on record at the end of March.
The only way out of this unstable economic environment is to end the fiscal madness and empower small businesses through pro-growth policies like those in the Job Creators Network’s American Small Business Prosperity Plan.
That may not be as exciting as the culture wars, but it has a much bigger impact on the lives of ordinary Americans—as demonstrated by Democrats’ destruction of Americans’ growing living standards birthright.
This article was originally published by RealClearPolicy and made available via RealClearWire.
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