E. J. Antoni: Reality’s revenge; the return of stagflation

No one is fooled by the Biden administration moving the definitional goalposts on what constitutes a calamity.

U.S. President Joe Biden meets virtually with infant formula manufacturers from the South Court Auditorium at the White House in Washington, D.C., on Wednesday, June 1, 2022.
Yuri Gripas/Abaca Press/TNS
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The clinical psychologist Jordan Peterson has said that you can bend reality only so far before it snaps back at you. In short, bad actions always ultimately have negative consequences.

America is living through the economic equivalent of this principle right now. For a year and a half, the federal government has spent, borrowed and printed trillions of dollars while simultaneously pursuing an anti-energy agenda. The result is stagflation.

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The term stagflation — first coined during the economic doldrums of the 1970s — refers to the combination of stagnant economic growth and inflation, both of which are afflicting the American economy today. The economy shrank in the first three months of the year, and did so again in the second quarter.

On top of that, inflation is at the highest rate in four decades, and prices are rising about as fast in a single month as they used to in an entire year when President Joe Biden first took office.

The inflationary fire has been fueled by Federal Reserve creating money for Congress’ and the president’s profligate spending sprees. Although these institutions repeatedly asserted that inflation was nothing to worry about or merely transitory, reality is not conforming to their assertions. You cannot create trillions of dollars out of nothing and expect no negative consequences.


Energy prices in particular have exploded since Biden took office due in large measure to his war on domestic energy, like coal, oil and natural gas. This should come as no surprise, since Biden promised during his campaign to be the death knell of fossil fuels. From canceling pipelines and drilling leases to expanding regulations, the White House has chilled investment and production in these industries, driving up prices for consumers, especially at the pump.

And because energy affects everything we do and everything we buy, those high energy prices are now trickling down into the price of everything else. In short, this anti-energy agenda is increasing costs of production across the economy, and that is a recipe for slower growth.

This economic one-two punch to the middle class has led the White House to pursue a strategy of damage control. Instead of doing a mea culpa and changing course, the Biden administration is doubling down and playing word games.

The latest sleight of hand by the Biden administration is to redefine a recession. But that just adds insult to injury for a hurting middle class who have been made demonstrably poorer by impolitic government policies.

Nevertheless, American families are not fooled; they are well aware of the financial pain they’ve been experiencing over the last 18 months. Their incomes have fallen relative to prices, and more than half no longer have an adequate emergency fund, while a quarter have none at all. The amount families are able to save from month to month has collapsed, while household debt is growing.

This reality is all painfully apparent to the American middle class. They’re living it every day and do not need a government bureau to tell them that economic growth has stagnated while prices maintain their vertiginous climb. Those of us who regularly go to grocery stores and gas stations have seen inflation with our own eyes — and felt it in our own wallets. But it speaks to the isolation of Washington bureaucrats that they are surprised when inflation reports are high or economic growth indicators are low.

The average American knows that stagflation is here. They are hurting from the hidden tax of inflation, sky-high energy prices, unaffordable housing and slow growth. It doesn’t take an official determination from on high to declare that we are in a recession for everyone to realize the economy is headed in the wrong direction. Biden would be wise to reverse course immediately because not he, nor anyone else, can cheat reality.

E. J. Antoni is a Research Fellow for regional economics in the Center for Data Analysis at The Heritage Foundation and a senior fellow at Committee to Unleash Prosperity.


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