EDITOR's note
Ruthann Marcus this week discusses her varied roles as an epidemiologist with the Centers for Disease Control and Prevention. She was there for the fight against AIDS and multiple food poisoning issues. Her investigations may have saved you from drinking dangerous apple cider. Tune in to Who Get What at mortonjohn.libsyn.com or your favorite podcast site.
Mather Marcus, the preacher in our family, is telling me, “It’s the Feds who’ve caused all this inflation. Why a $20 bill today buys only about what $17 bought five years ago. We’ve been robbed of three dollars. And who benefits from that?

“You know,” he continues, “it’s the same old story: too much money chasing too few goods.”

“Indubitably,” I respond. “Inflation is once again the result of the government, with the Federal Reserve System, trying to do the right thing.”

“The right thing?” he bellows in his Almighty voice.

“Yes,” I say with dignified calm. “COVID caused many people to lose their jobs because other people became sick and stopped buying so much stuff. So the government put out an additional $509 billion in 2020 to help the unemployed directly. This was on top of the more usual $27 billion paid out for unemployment compensation in 2019.”

“Was this misdirected government action?” I ask.

“Certainly not,” Mather proclaims with certainty.

“Yet,” I continue, “that sum was just 46% of the relief the government provided in the face of the COVID pandemic.

“Because so many people fell ill, hospitals and health care providers received an extra $77 billion in Medicare and Medicaid payments for 2020 over what they were paid in 2019. Was that too a mistake?”

“Most clearly not,” Mather says with gravity of voice.

“And buying $250 billion of corporate bonds and notes,” I say, “the Fed protected the banks, which could then lend money to home buyers. With the repayment of mortgages from the proceeds of selling, money went back into the banks. Many home sellers were not desperate victims of COVID. They then borrowed more from the banks for more expensive houses or remodeling existing homes.”

“Nothing wrong there,” Mather asserts.

“Except,” I note, “the builders could not get enough workers to satisfy the increased demand for houses and remodeling.”

“But inflation?,” he questions.

“Yes, inflation starts with the home buying, followed by the supply chain problems and the reluctance of people to return to their old jobs at the old pay rates. Then there’s Ukraine and a spike in energy prices which boosts still other prices,” I explain.

“Can’t we stop inflation?” Mather asks, panic in his voice.

“Yes,” I’m very calm. “In 2020, federal stimulus spending showed an increase of 35%, but only 8% in 2021. That’s slamming on the brakes, slowing the addition of stimulating funds from $1.1 trillion to $360 billion.”

Mather’s concern persisted. I tried again. “Bringing U.S. consumer spending to a slower rate of growth is like slowing a big truck. Too much pressure on the brakes and it can jack-knife.”

“You’re putting the blame for inflation on consumers?” he is incredulous at my audacity.

“Yes,” I respond, “but don’t tell anyone. It’s not polite to be disrespectful of consumer sovereignty.”
Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers, and his views can be followed his podcast.

© 2024 Morton J. Marcus

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