Some want to solve the problem with subsidies for gas, housing, child care, and more. That only risks greater stagnation.
by Veronique de Rugy
Reason.com
Many people still blame today’s inflation on snags in globe-spanning supply chains. The chief proposed solution is to dismantle decades of globalization and bring production home. Some are also pushing for measures to offset inflation, including robust child subsidies and tax rebates for gas and food.
These proposals are rooted in a misunderstanding of the true cause of inflation: namely, government-induced demand. More spending, therefore, will only fuel the inflation fires.
Over the course of the pandemic, the Treasury Department issued roughly $6 trillion, $2.7 trillion of which was monetized by the Federal Reserve. Americans were sent $5.1 trillion through various programs, including individual checks and unemployment bonuses. Overall federal debt has since risen by about $6 trillion.