Biden’s Fight Against Inflation Is Failing Homeowners

The causes of inflation can be hard to isolate, but in the US at least, one culprit is clear: President Joe Biden and congressional Democrats spent too much in the last two years, and even now refuse to take steps that would ease the problem.

Economists usually think of inflation as coming in one of two ways: from the supply side or from the demand side. The former is when an important input — such as microchips for automobiles — is in short supply. That drives up prices, usually but not always temporarily. The latter is when a combination of excessive government spending and low interest rates creates more demand for goods and services than the private market can produce. This type of inflation is self-sustaining unless the government cuts spending or the central bank raises interest rates.

Over the last two years the US has seen both types of inflation. In fairness, there is little the government can do about supply-side inflation. Demand-side inflation, however, is a different story — and prominent economists such as Larry Summers issued prescient warnings about congressional Democrats and the White House were adding to it with their oversized stimulus bill in 2021.

Then came the war in Ukraine, which only added to inflationary pressures. One might have hoped that month after month of record price growth would have spurred government officials to adjust their strategies.

Fed Chair Jerome Powell, at least, did just that. The central bank has moved decisively with large increases in interest rates and expressed a determination to keep raising them until inflation is contained.