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OPINION – Inflation is quickly becoming a problem

In previous weeks, I warned you that the policy of the administrations in Richmond and Washington would result in inflation.  To the surprise of many, it has come quickly and with vengeance.

Generally, inflation occurs slower than we are currently experiencing.  When it is slow, we feel it, but we learn to adjust.  When items go up in the grocery store, we tend to adjust the quantities or qualities of what we purchase, at least until we have numbed ourselves to the higher costs.

Gasoline Prices

The shutdown of the Colonial Pipeline last week amplified the issue of what it costs to fill up our vehicles.  However, the price was creeping up over the last year.  It had risen about one dollar a gallon prior to this past week.

That is roughly a 60% increase, and it will continue at this rate based on projections of the policies occurring in Washington and Richmond.  Stopping the Keystone Pipeline has been the most visible change.  However, regulations at every level of government have made domestic production more expensive while making us more dependent on fuel from overseas.

Energy

While the cost of gasoline is the most noticeable side of energy inflation, your home energy costs are going to rise dramatically.  President Biden is attempting to end much of the production of domestic natural gas.  At the same time, the Democrats in the General Assembly, working with Governor Ralph Northam, have set Virginia on a course to end the use of fossil fuels in Virginia in a few years.  This includes fuel for heating homes as well as requiring electric cars to replace gasoline powered automobiles.  These changes will result in far greater need for electrical power.

The dreamers are perfectly happy with situating solar panels all over the landscape of rural Virginia.  Solar power might be a portion of our needs for electrical power, but it is more expensive.  You will pay for it with higher utility bills and with taxes that subsidize solar power.

Construction Costs

The cost of housing construction is something that few focus on until they are preparing for a major project to build or improve their homes.  Currently, lumber prices are more than 80% greater than a year ago, with plywood not far behind.  Part of that is because of the cost increases of logging.  Those increases have been partially affected by diesel fuel increases needed to harvest lumber out of the woods, process, and deliver to the worksite.  Additionally, payroll shortages from COVID and the government response to COVID has made it harder and more expensive to handle that lumber.

Groceries

As I wrote above, grocery prices have been rising and will continue to do so at a much faster rate.  Every item that we put on our plate is affected by increasing payroll costs.  As the government forces wage increases, every business that handles those products must increase their prices.  From the farmer that must calculate the cost of more fuel and payroll costs, through every middleman and processor, to the final retailer, each participant in the process will need to make upward adjustments.

The 60s and 70s

Under the presidential terms of Presidents Lyndon Johnson and Richard Nixon, the interests of an ever-expansive federal government wanted to have it all; inflation made that possible, for a while.  Inflation led to taxpayers being driven into higher tax brackets.  President Johnson’s Great Society vastly expanded domestic spending, far beyond our capacity to fund it while at the same time fighting a war in Southeast Asia.

There was no interest in trying to rein in any of that spending and the resulting inflation until President Gerald Ford.  During his term, his slogan was “Whip Inflation Now.”  While not completely successful, it did focus the public’s attention on the long-term effects that runaway inflation was having on our economy.

Biden Administration

First, the president said the inflation was the result of the “booming” economy.  Last week, when reporters asked about the sudden increase in prices, President Joe Biden’s spokeswoman undercut his statement by responding, “The White House takes the possibility of inflation quite seriously.”  However, as is usually the case, actions are far more important than words.  The real question reporters should be asking is what they are doing to slow down inflation.