US feeling pinch of inflation but economy is good, says economist

Dec 2, 2021, 3:41 PM
FILE: Dale and Vicki Hoskins shop at Reams in Sandy on Friday, July 9, 2021. In a new Deseret News/Hinckley Institute of Politics poll, an overwhelming majority of Utahns said they were concerned about rising prices amid the economic recovery from COVID-19. Credit Jeffrey D. Allred, Deseret News.

SALT LAKE CITY — The US economy may be feeling the pinch of inflation — most nations are — but unemployment rates in the country are the lowest in 50 years, and Americans are feeling good about the job market now, says a visiting economics professor at the University of Utah.

Inflation, the economy and politics

The United States has been on a spending spree lately, Rep. Chris Stewart, R-Utah, pointed out.

“We have spent more than $11 trillion in 18 months,” he said.

KSL NewsRadio’s Dave Noriega pointed out that the nation has been mired in a pandemic, hence the massive spending. But not all that money was spent to defeat COVID-19, he noted.

The $1.2 trillion bipartisan Infrastructure Investment and Jobs Act was signed into law last month. Plus, the Build Back Better bill being debated now would add $1.75 trillion, if it passes Congress.

Does printing money impact inflation?

Dean Baker, who is a senior economist at the Center for Economic and Policy Research and a visiting professor at the University of Utah, joined KSL NewsRadio’s Dave & Dujanovic Wednesday to talk about inflation and printing money.

The Federal Reserve Board is the source of money, but it does not have massive presses printing out billions of dollars a day. What we might call printing money, Baker said, is the Fed gives cash reserves to commercial banks. 

We notice the printing of money through interest rates, he said. And, car loans, mortgage and credit-card interest rates have all fallen, he added.

“So that’s how we see their printing of money.”

Bank reserves have increased $2.4 trillion, which is near the increase issued during the Great Recession from December 2007 to June 2009, the longest economic downturn since World War II.

During that span “We had almost no inflation — in fact, less inflation than the Fed wanted. So the relationship between the printing of money and inflation is at best, very, very indirect,” Baker pointed out.

Other countries also seeing inflation, tough economy

But Stewart is referring to the federal government spending money, Baker added.

He pointed out that both the Trump administration and the Biden White House were involved in sending out checks to citizens and businesses impacted by the pandemic.

“Both parties had their fingers in it,” he said.

But other countries are now also experiencing inflation woes — without burning through cash reserves — and supply-chain problems, Baker noted.

“You could look at Spain . . . Germany . . . at the UK [United Kingdom]. Countries that didn’t spend all that much have very comparable rates of inflation.”

How the U.S. stacks up

In fact, a Pew Research Center analysis of data from 46 nations finds the third-quarter 2021 inflation rate was higher in most of them (39) than in the pre-pandemic third quarter of 2019. The increase in the U.S. inflation rate – 3.58 percentage points between the third quarter of 2019 and the third quarter of 2021 – was the third highest in the study group, behind only Brazil and Turkey, according to Pew Research Center.

“I don’t think that’s directly  — or at least not in a big way — due to the federal spending.”

Baker said the reopening of the US economy has brought good things, too.

“We’re reopening with a strong labor market. The unemployment rates is 4.6%. Unemployment claims are the lowest they’ve been in 50 years. People feel good about their job prospects, so they could leave a job if they don’t like it. . . . The inflation, of course, is bad news, but that’s happening everywhere.”

Find out more about the US economy: Bureau of Labor Statistics.


Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.  

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US feeling pinch of inflation but economy is good, says economist