Facts vs Myths: Who’s to Blame for 2022’s Record-High Inflation?

Facts vs Myths: Who’s to Blame for 2022’s Record-High Inflation?

https://www.allsides.com/blog/facts-vs-myths-who-s-blame-2022-s-record-high-inflation



















Who is to Blame for Inflation? Exploring Misleading Claims | AllSides








This blog was written by Content Intern Rose Mercer (Lean Left bias) and News Assistant Ethan Horowitz (Lean Right bias).


Inflation has often been described as a hidden tax on living, penetrating into even the most routine aspects of life that are normally insulated from the actions of political brass and economic heavyweights. 

Especially if wages do not increase parallel to inflation, which they almost never do, it can be particularly damaging to Americans’ spending power. And with U.S. inflation reaching record highs several times this year, the issue is back at the forefront for voters.

The situation has also created a giant blame-game. One claim that we hear often is that inflation can be attributed to the actions of one individual or group. Specifically, many people have claimed that Joe Biden, Vladimir Putin, or Jerome Powell is primarily to blame for high inflation. 

There’s no fair way to just blame one person for inflation, and putting all the blame on one actor is a form of misinformation. Let’s evaluate where these claims fall short.
 

People Who Blame Biden Say

-The Biden administration spent too much money on COVID relief
-The American Rescue Plan was not worth the inflation it caused
-Biden is to blame for the mistakes of the Fed .

People Who Blame Putin Say

– Putin’s invasion of Ukraine is the main catalyst of inflation

-The war in Ukraine has hiked the prices of oil, wheat, and other commodities, driving inflation

 

People Who Blame Powell Say

– Powell should have raised rates and tapered asset purchases earlier
-The Fed’s inconsistent communication has contributed to inflation
– Powell and the Fed have lost the trust of the American people

 

Before we begin to unpack some of the myths regarding who is at fault for the recent increase in inflation, it is important to first understand what inflation is, how it manifests in the economy, and how different forces have influenced current inflation levels.

Table of Contents

  1. What is Inflation?
  2. Why is There Debate?
  3. Is Inflation Joe Biden’s Fault?
  4. Is Inflation Vladimir Putin’s Fault?
  5. Is Inflation Jerome Powell’s Fault?
  6. Conclusion

What is Inflation?

While inflation is not actually a tax, high inflation can be incredibly taxing on Americans and disproportionately impacts less fortunate people. For example, the cost of groceries and food have rose 11.2% and 13% respectively in the 12 months ending in September — the highest rates since 1979.

High inflation is usually a sign that an economy is overheating. This is due to supply and demand. When the economy is “overheated,” producers cannot supply all the goods that customers demand, so they raise prices. This is one of the main reasons for currently high gas prices in the U.S.

While the FED targets 2% inflation a year to stimulate the economy, higher inflation can pose a significant risk, eroding purchasing power, decreasing savings rates, and setting up potential recessions. It also leaves people frustrated and looking for someone to blame, which can lead to misinformation and misleading narratives.  

When inflation is high, people anticipate high inflation in the future. As a result, they demand raises to compensate for the decreasing value of their salary. Firms respond to rising labor costs by raising prices, which further increases inflation. This feedback loop is very dangerous and can lead to recession, so the government deploys tools to fight it.

Why is There Debate?

The delicate balance between price stability and low unemployment is at the center of a fierce blame game in Washington, with Federal Reserve Chairman Jerome Powell and President Joe Biden taking most of the heat. 

The overall CPI (Consumer Price Index), which measures the prices consumers pay for goods and services, has increased by 8.2% over the last 12 months as of September 2022.

The Fed raised interest rates another .75% at their September 2022 meeting, the fifth increase in a row. 

There are objectively three possible causes whenever inflation rears its head: demand pull inflation, cost push inflation, and built-in inflation.

However, in 2022, complexities that don’t fit neatly into these categories – such as the war in Ukraine, supply chain issues, and the pandemic – are turning an issue that is usually clear-cut and bipartisan into a political war of words, and have exposed forces outside of the U.S. to criticism regarding inflation. 

It is important to note that inflation is a global issue, the actions of the FED impact the global economy and inflation in many nations is even worse than in the US. For Example, many European nations are dealing with more intense inflation due to their proximity  to the war in Ukraine, as well as the strength of the dollar against the Euro and other currencies. 

Undoubtedly, the economy is overheated, and the Fed has been taking aggressive action to tame it. Is the Fed Increasing rates too quickly? Is it already too late to avoid a recession? Who is worthy of blame for inflation? 

Is Inflation Joe Biden’s Fault?

As inflation begins to pick up, the voices blaming Biden have increased in amount and ferocity. Right-rated media outlets have been more likely to blame Biden for recent inflation issues, and many cite increases in government spending during his administration’s tenure. 

RELATED: Sobering Inflation Report Dampens Biden’s Claims of Economic Progress

Even some Democrats have shared this sentiment. A poll conducted by I&I/TIPP’s found that 53% of Democrats believe Biden’s policies are to blame for inflation.

While there is a general consensus that the Fed is responsible for curbing inflation, fiscal policy also has an impact. When people discuss Biden’s contribution to inflation, they are largely referring to his approval of legislation which pumped trillions of dollars into the economy during the COVID-19 pandemic. 

Stimulus bills during the COVID-19 pandemic started the most rapid acceleration of government spending in American history. To date, over $5 trillion dollars of stimulus has been deployed, ending the shortest recession on record (three months in 2020). While the initial spending was popular among Americans, more fiscally conservative voices became skeptical as this spending continued. 

The greatest source of contention is with the American Rescue Plan (March 2021). This $1.9 trillion bill included another round of stimulus spending, child tax credits, and unemployment benefits. While some people applauded this legislation, others thought it was unnecessary and would bring inflation to uncontrollable levels, especially after Congress passed another COVID-19 relief bill in December 2020. This bill, along with the CARES act, was passed under President Trump. Either way, it certainly contributed to inflation in some capacity, though the exact amount is debatable

As a result of stimulus checks and other government assistance, millions of Americans decided not to work, and many still have not returned. This, along with rapid job growth created a very tight labor market. As of August 2022, there were still 11.3 million unfilled jobs in the U.S. workforce, compared to roughly 7 million at the start of the pandemic. This creates significant headwinds against the FED’s attempts to cool off the economy by raising interest rates. If unemployment doesn’t rise, it will be very difficult for consumer demand to decrease and bring down inflation. 

Also, some right-leaning voices have argued that Biden’s climate agenda has contributed to surging oil prices. Some of these policies include new Environmental Protection Agency oil rules regarding storage and production that were adopted in 2021. Also, Biden canceled or suspended many energy projects, including the Keystone XL pipeline and some projects in Alaska.

Finally, Fed chair Jerome Powell was reappointed for a second term by Biden, and Biden has often supported his policies, so any contribution Powell may have had to inflation

MSNBC (Left Bias) and other news sources on the left argue that Biden has become a scapegoat in the blame-game of inflation, arguing that, “This is in no way a Biden-caused problem.”  Left-rated sources are more likely to attribute it to larger global trends. Some on the left feel the issue has become a pawn in advancing an anti-Biden political agenda rather than searching for a real solution

Government spending is a delicate balancing act. Whether the Biden administration spent too much, too little, or the perfect amount is subjective and dependent on the economic priorities of each person. But media outlets across the political spectrum acknowledge that high pandemic spending played a role in fueling currently-high inflation levels.

Is Inflation Vladimir Putin’s Fault?

Biden and some voices on the left have claimed that Russia President Vladimir Putin’s invasion of Ukraine is to blame for rampant inflation. In a speech regarding rising gas prices and “Putin’s Price Hike,” Biden said, “And let’s remember how we got here: Putin invaded Ukraine.”

Biden challenged those on the right criticizing him for the inflation, saying, “So, for all those Republicans in Congress criticizing me today for high gas prices in America, are you now saying we were wrong to support Ukraine?  Are you saying we were wrong to stand up to Putin?  Are you saying that we would rather have lower gas prices in America and Putin’s iron fist in Europe?  I don’t believe that.”

Some left-rated news sources have reinforced Biden’s rhetoric. A senior columnist for Yahoo News (Lean Left bias) declared, “The Russian president’s belligerence has clearly had the most pronounced effect on global prices of any single geopolitical development since the oil shocks of the 1970s.” 

Supporting this perspective that Putin is at fault, countries closer to the warzone are facing even worse cases of inflation. The inflation forecast for OECD member countries was 4.4% before the war and has now doubled to 8.8%.

RELATED: Russia-Ukraine Tensions Put World on Edge 

Yahoo News (Lean Left bias) posted an article from The New Voice of Ukraine attributing high inflation forecasts to the collateral damage of sanctions the United States and these other countries have placed on the Russian economy in response to Putin’s invasion. As the world’s largest gas and oil producer, these economic sanctions have impacted Russian sales and subsequent energy supply. Russia is also one of the largest food suppliers, and these sanctions have impacted these exports as well. 

CNN Business (Left Lean Bias) also has blamed the Russian invasion of Ukraine for inflation, alongside the pandemic. While citing the pandemic as the earlier cause of recent trends of inflation, CNN Business says, “The conflict has upended commodity and oil markets, driving up prices of food and gasoline around the world. That’s compounding supply chain headaches, leading to further shortages of critical food items and oil.” 

Conservative writers at The Washington Post (Lean Left bias) and National Review (Right bias) have struck a different tone, criticizing Biden for blaming inflation on Putin as a purported effort to misdirect criticism of his own economic missteps. One argued that “it is incredibly dishonest to blame rising inflation on Putin” because “gas prices had already been rising for over a year before Putin invaded Ukraine. Also, the new report shows broad-based inflation. Even if removing food and energy entirely from the equation, inflation in May was still up 6 percent over last year.”

The start of the war in Ukraine spurred a spike in gas prices, which were already on the rise here in the U.S., as well as sanctions against Russia and the response of global oil markets, which all play a role in current inflation numbers. 

Is Inflation Jerome Powell’s Fault?

When inflation started to climb, Federal Reserve Chairman Jerome Powell continued to say that it was “transitory,” an ultimately inaccurate characterization of the inflation facing Americans today. In late 2021, Powell yielded, admitting that, “I think it’s probably a good time to retire that word and try to explain more clearly what we mean.” 

The Fed has been criticized by both left-rated and right-rated sources, including New York Times (Lean Left bias) and Fox News (Right bias), for raising interest rates too late. The first hike came in March, but even Powell himself now says it should have come as early as September 2021. Including the March raise, the Fed has now increased interest rates five times this year. 

The Fed also significantly increased their balance sheet throughout the pandemic, rapidly buying billions of dollars of bonds to stimulate the economy. While they eventually tapered these efforts in November 2021, some believe the tapering should have begun earlier. 

Despite personal opinions on who is at fault for inflation, there is broad consensus that Powell’s messaging has been inconsistent and global markets have not reacted well to this uncertainty. 

Powell is the face of the Fed, but he is also one individual in an incredibly complex system with hundreds of economists, legislators, and bureaucrats. Powell does not have the power to control the pandemic, the war in Ukraine, or federal spending.

Thus, while people should form their own opinions on the Fed’s reaction to rising inflation, it is important to remember the limited scope of Powell and the Fed’s control over inflation. 

Conclusion

The real answer is that no one single person or entity is at fault for the recent rampant inflation. Accurately placing blame for inflation would require directing blame at all three individuals named above, in addition to other forces.

Putin’s invasion and the subsequent war in Ukraine have certainly contributed to rising prices and market difficulty, but inflation was a mounting issue even prior to these events. 

The COVID-19 pandemic crisis inevitably led the global economy to grind to a halt. As restrictions lifted, inflation rose, furthered in part by Biden’s stimulus efforts, overwhelming the supply chain as the country began spending again. 

From there, Fed chair Jerome Powell was in a difficult position, as pressures to keep rates low to bolster the economy quickly turned to pressures to raise rates to combat the inflation. Powell himself admitted that in retrospect, the Fed should have raised rates sooner. However, at the same time most experts say Powell should have raised rates – around last summer – the end of the pandemic was more uncertain and raising rates would have likely brought about backlash as well.

Inflation is a complex issue. Looking at all of the pieces together, it is impossible and unproductive to try to pin all of the blame on any one source or decision. Inflation involves a variety of factors both within and outside of the control of individuals and the government as a whole.

RELATED: AllStances: Is Inflation Always Bad?

A blame-game does nothing to mitigate the issue, and actors on all sides would benefit from working together to bring inflation back to a manageable level

Inflation can be moderated by responsible government spending, modifying central bank policies, regulation of the supply chain, as well as the cooling down of global issues including the pandemic and the war in Ukraine. 

Efforts to that end are being taken, and are certain to continue as voters continue to worry more about inflation than any other issue.


Ethan Horowitz is an AllSides news assistant. He has a Lean Right bias.

Rose Mercer is an AllSides content intern. She has a Lean Left bias.


Reviewed by: 

Managing Editor Henry A. Brechter (Center bias)

Daily News Editor Joseph Ratliff (Lean Left bias)

Director of Media Bias Ratings and Marketing Julie Mastrine (Lean Right bias)



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