Turns out money does grow on trees! The trees just look like printing presses at the Federal Reserve Bank of the United States. We know this to be true because the revenue numbers for Fiscal Year 2022 are in. The U.S Government collected $4.9 trillion dollars from taxpayers, by far the biggest tax haul ever, 21% ahead of last year.
Well, the economy did not grow 21% this past year, so where’s all the money coming from? Since Biden was elected, the federal government has authorized borrowing $4 trillion for extra spending above and beyond paying for normal expenses. The huge revenue gusher can’t even keep up with “normal expenses,” because the government actually spent $6.3 trillion in 2022.
No wonder inflation is out of control and shows no signs of cooling off. Our economy is still awash in cash chasing not enough supply of goods, services, and employees. The Consumer Price Index for September just came in at 8.2% with the core rate ticking up slightly from last month to 6.6%, the biggest year-over-year rise since 1982.
The inflation beast will force the Fed’s hand to keep raising interest rates, making a recession more and more likely. I wish I could say inflation will be coming down soon, but the government keeps adding fuel to the fire. The additional spending from the American Rescue Plan is just now entering the system as states like Oklahoma divvy up the money for a host of projects. I wish state leaders had listened to us and sent some of the money back instead of joining in the spending spree.
The infrastructure grants from the Bi-Partisan Infrastructure Legislation are just beginning to be issued for projects across the country. The additional funds from the bizarrely named Inflation Reduction Act and the CHIPS Act haven’t even been printed yet. And states across the country are using their own gusher of revenues created from all the borrowing to send money to consumers through cash rebates and tax cuts for more spending to offset the inflation pain, which will in turn create more inflation.
The Federal Reserve is having to push against tremendous pressure, and it could take much more than people think to tame the inflation beast.