Inflation and Rising Grocery Prices

Every politician in Washington wants to talk about inflation and the rising cost of groceries. Almost none of them want to talk about the actual root cause. It is not just tariffs. It is not just one war or one supply shock. The deeper driver of the cost-of-living crisis hitting American families is the federal government spending far more than it takes in, year after year, and financing the gap through borrowing on a scale the country has never sustained in peacetime. The federal government is on pace to run a deficit of roughly $2 trillion this year alone. Debt held by the public — what the Treasury has borrowed from outside lenders, markets, and foreign governments — has climbed past $31.8 trillion. Counting what the government also owes its own trust funds, like Social Security and Medicare, the total national debt now stands at approximately $39.6 trillion. When the government floods the economy with borrowed money, year after year, it shouldn’t surprise anyone that the value of every dollar in your pocket goes down and the price of everything you buy goes up.

Here is where I’ll part ways with most politicians in both parties: I am not going to pretend there’s a painless way out of this. Think about it this way. Imagine every month you spend more than you earn and put the difference on a credit card. In the short run, you experience prosperity and a higher standard of living. But in the long run, the credit card company will cut you off, and you will be forced to reign in your spending, and when you do, it will affect your overall quality of life. Now take this example from an individual household budget and scale it to the economy of our entire country. Some will say this comparison is too simple, that the federal government isn’t a household, because it can issue its own currency and borrow in dollars it controls, tools no family has. To some level that’s true, but those tools have limits too. The fact that Washington can run up the credit card longer than your household can doesn’t mean it can do so forever without consequence, it just means the eventual reckoning is larger, and harder to control, when it finally comes. Before the recent inflation hit, there were some arguing for a debunked theory known as “MMT”.

So here is the choice we actually face, whether we admit it or not: a difficult adjustment now, on our own terms, while we still have the ability to choose it, or a far more painful reckoning later, on terms dictated by our creditors and by markets that have lost patience with us. Nearly every serious economist across the political spectrum agrees that debt growing faster than the economy indefinitely is not sustainable. The only real question is whether we manage that adjustment deliberately, or whether it’s forced on us in a crisis — a sudden spike in interest rates, a loss of confidence in the dollar, or worse. Recently many Americans were told that they should support an unnecessary war on the grounds of “short term pain for long term gain.” That was completely inappropriate and an insult to hardworking Americans. Yet balancing the budget might be a legitimate application of this principle.