Democrats plot to halt inflated gas prices by...printing more money

Democrats don't seem to ever learn Economics 101, do they?

That's obvious enough in their various bone-headed schemes to beat soaring gas prices at the pump by throwing new money at the problem. 

Fox11 has the story:

One proposal comes from Reps. Mike Thompson of California, John Larson of Connecticut, and Lauren Underwood of Illinois. 

The congressional lawmakers propose the Gas Rebate Act of 2022 where Americans would get an energy rebate of $100 per month (and $100 for each dependent) for the rest of 2022 in any month where the national average gas prices exceed $4.00 per gallon.

"Americans are feeling the impact at the pump of Vladimir Putin's illegal invasion of Ukraine, and right now we must work together on commonsense policy solutions to ease the financial burden that my constituents are feeling," Thompson said in a news release. "The Putin Price Hike is putting strain on our economy, and I am proud to be working with Reps. Larson and Underwood to introduce this legislation to provide middle-class Americans with monthly payments to ease the financial burden of this global crises."

The rebate follows the same phaseout as the most recent Economic Impact Payments (EIPs) where $100 will be given for single filers earning less than $75,000 and phased out to $80,000. The other part includes $100 for joint filers more than $150,000 and phased out at $160,000.

Ah.  Putin did it.  As if the inflated prices of fuel at the pump didn't start until Putin went medieval on Ukraine.  Powerful guy, that Putin, commanding all those energy prices.

The logic of this bad idea is that gas prices can be treated with COVID-style stimulus checks — everyone gets one, and the Fed can print up another batch of cash to take care of the payouts.

What's wrong with this picture?

Specifically, what happens when the Fed turns on the money presses?

Well, see here: 

The FreeThoughtProject has some observations here:

When you print more money it means there are more dollars chasing the same amount of goods and services, which causes prices to rise. In just the past three fiscal years, federal spending has swollen to nearly $7 trillion a year, up from about $4.4 trillion in fiscal year 2019. Spending was $6.6 trillion in 2020, and $6.8 trillion in 2021.

If we want to put this into perspective, we can take a look at the monetary supply at the beginning of 2020, which showed just $4.0192 trillion in circulation. By January 2021, that number had jumped up to $6.7 trillion — but this was only the beginning.

By November of last year, that number climbed to $20.354 trillion dollars in circulation — meaning that since January 2020, the United States has printed nearly 80% of all US dollars in existence. 

This is according to the Board of Governors of the Federal Reserve System and not some conspiracy theory either. 

Here's the FRED graph from the St. Louis Fed, which shows M1, the cash and bills in circulation:

What necessitated that cash-printing fiesta?  Try all the huge stimulus bills rammed through by a Democrat-led Congress over the past two years — the various COVID relief measures, piled on top of all the Obama-era stimulus packages.

According to Forbes columnist Rob Berger:

While the CARES Act is the most recognized Covid-19 relief package, there have been four to date, not including President Trump's executive actions:

  • Coronavirus Preparedness and Response Supplemental Appropriations Act (March 6, 2020)
  • Families First Coronavirus Response Act (March 18, 2020)
  • Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) (March 27, 2020)
  • Paycheck Protection Program and Health Care Enhancement Act (April 24, 2020)

Those payouts fired up the Fed's money presses good and hot:

The U.S. government spent $6,551,872,000,000 in fiscal year 2020 that ended on September 30th. It was a record year, although not in a good way. Spending represented a jump of more than $2 trillion from the previous year, a 47% increase.

At the same time, government revenue was down. The difference wasn't significant, amounting to a 1% decline, or about $42 billion. As spending skyrockets, however, every dollar of revenue becomes all the more important.

Note: That's just one year, there have been several.

Now let's look at the inflation printout:

The consumer price index, which measures a wide-ranging basket of goods and services, increased 7.9% over the past 12 months, a fresh 40-year high for the closely followed gauge, according to the Labor Department's Bureau of Labor Statistics.

The February acceleration was the fastest pace since January1982, back when the U.S. economy confronted the twin threat of higher inflation and reduced economic growth.

In other words, call for stimulus, print money for checks, and watch inflation grow. 

And sure enough, that dynamic has hit gas prices, and almost everything else, too.

Rather than turn off the printing press, Democrats are proposing more stimulus checks, to be printed out again by the Fed.

What happens when you turn the Fed's money presses on yet again? 

These gas stimulus checks will only drive inflation higher and render those stimulus checks pretty fleeting. 

It goes to show the economic fallacy, embraced by Team Biden, of imagining that the root of the inflation gripping the country is energy prices, not money-printing.  Plenty of nations have high fuel prices, but zero inflation — just look at Switzerland and Sweden.  Those nations practice fiscal discipline and don't have anything like the runaway inflation seen here.  Same with the supply chain fallacy — Japan has much worse supply chain problems than we do and no significant inflation.  Bzzt!  Scratch that Biden-driven fallacy, too.

Yet the "narrative" of energy prices being at the root of inflation is an enticing one.  Even some conservatives embrace it as they seek to persuade Biden to pump more American oil.  It may seem logical, given that fuel prices affect other prices, but it's fundamentally wrong.  After all, if gas prices are at the root of inflation, why wouldn't more Fed money-printing fix the whole problem?

But the reality is, it's money-printing that creates inflation, and gas prices are just a major knock-on effect.  That is why Nobel prize-winning economist Milton Friedman, who was the godfather of the Reagan Revolution and the Chilean Miracle and countless other prosperity transformations around the world, stated unequivocally that "inflation is always and everywhere a monetary phenomenon."  Anything else is Bidenomics.

You don't put out a roaring fire by pouring gasoline on it.  You don't solve fuel price inflation by printing more stacks of federal money.  This Democrat scheme to solve high gas prices by printing money will have the opposite of its intended effect.  Sound like a bright idea?

Image: Federal Reserve of St. Louis, government work, public domain.

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