(JustPatriots.com)- In a hearing before the House last Thursday, Treasury Secretary Janet Yellen said that high rates of inflation will continue through the end of the year.
In her judgment, Yellen told the House Appropriations subcommittee, the recent increase in prices is not “endemic” but temporary — expecting it to last several months.
Yellen blamed the price increases and rising inflation on the pandemic which she claimed caused major changes in spending patterns.
Many economists, however, disagree with this assessment believing instead that the massive spending bill passed in February was a driving factor in the rise in prices and inflation. Last week, Senator Rick Scott (R-FL) made this point rather vividly in a presentation he called “The Price is Wrong.”
Republican senators coalesce around with a strong message by tearing into Biden for "Inflation Crisis" because of excessive and foolish spends [sic].
Esp note Gas price increase by 50% pic.twitter.com/TwELadKCNQ
— UN (@UshaNirmala) May 28, 2021
Meanwhile, the White House issued a statement last week claiming that Americans are paying less “in real terms” for gas than they have on average over the last 15 years. Which seems a hard sell to try and make. Especially considering that the average cost for a gallon of gas ($3.04) is the highest it has been in seven years.
If inflation is due to the pandemic and not the infusion of trillions in government spending, it would likely be “transitory” as both Yellen and Fed chair Jerome Powell have said.
In her testimony before the Appropriations Committee, Yellen urged Congress to increase spending and devote more money to the President’s “recovery” proposals.
That would be an incredibly bad bet to make, however, if Yellen is wrong about the cause of the current inflation. If the rise in inflation is due to government spending, Yellen requesting more government spending into the economy would only add fuel to the fire.
As it is, Yellen’s projection that inflation would continue until the end of the year is already a couple of months further out than the White House initially claimed.
According to Market Watch, Yellen’s testimony to Congress will no doubt create a “communication headache” for the Federal Reserve which has remained consistent that the current high rate of inflation is “transitory.” But calling this increase “transitory” is a tougher sell if inflation wears on too long.
And Yellen’s projecting inflation to extend through the end of the year is definitely too long.