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Inflation continues to hold strong and resisting the Federal Reserve’s efforts to rein it in. The Fed has already announced plans to hike interest rates by 75 basis points, the third consecutive such increase. Straight Arrow News contributor Newt Gingrich says the Biden administration, with its recent spending bills, is taking the wrong approach. He warns that the Democrats’ plan to fight inflation is going to hurt America and plunge the country into an avoidable recession.
We’re faced with, I think, a continuing economic problem. It also means the government, because it’s following the wrong model, is going to cause a lot more pain, create an unnecessary recession, and put us in a situation where I think the Federal Reserve is clearly now going to raise interest rates by another three quarters of a point, deliberately forcing the economy into a recession.
I fought this out in the 1970s when I worked with Jack Kemp, and with a number of other key people, including the economist Art Laffer, who developed what was called the Laffer curve. We all…convinced Ronald Reagan that cutting taxes, cutting regulations, increasing the supply of goods and services, was the best way to fight inflation. Notice the difference.
If you’re on the demand side, what it says is, I have to crush your ability to buy things in order to bring down the inflation rate. It takes a lot of pain. If you’re on the supply side, as I’ve been in and as Reagan was and as Art Laffer still is, then you say you know, if I increase the total volume of goods and services, then automatically the prices will drop and we’ll beat inflation.
Tragically, the Democrats who are in charge are following a pain-oriented, recession-guaranteed approach that I think is going to be very painful for the country. And it’s made worse, frankly, by the recent bills that cause more spending and therefore increase the total amount of money available, and therefore drive up the inflation rate even more.
