The Inflation Crisis

Floor Speech

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Mr. SMUCKER. Madam Speaker, on September 1 of 1980, inflation was at almost 13 percent. On that day, then Governor Ronald Reagan said: ``Recession is when your neighbor loses his job. Depression is when you lose yours. And recovery is when Jimmy Carter loses his.'' Unfortunately, today is looking a lot like 1980, and the Carter and the Biden Presidencies share far too much in common.

President Biden has unnecessarily spent trillions of dollars, spiking inflation into a 40-year high of 8.6 percent. As a result of this inflation, American households will pay an additional $7,620 as they buy gas, food, and other things over the next 12 months--$7,620 annually.

Since Biden became President, real wages are down 4.2 percent while mortgage rates have doubled, have gone up 2.4 points. Our economy shrank 1.4 percent last quarter, and many economists now agree that these signs point to an imminent recession.

The President now points to the Federal Reserve to get him out of the inflation mess that he created. Today, I will point out what that may mean and talk about the challenge that the Fed faces to rein in inflation.

I have a chart here with me that compares the Federal funds rate, which is its benchmark interest rate, and inflation rates over the past 60 years. If you look at the chart, you will see two lines on the graph showing inflation and the Fed rate. Each time that the Fed looked to reduce inflation, they increased the interest rate, and they have increased the interest rate each time above the current inflation rate.

So, for example, in the early 1980s, which I mentioned earlier, following President Carter's era of stagflation, the Fed raised rates to a record high of over 16.5 percent to reverse what was 13 percent inflation at that time. So once again, this would suggest that for the Fed to do its job and rein in inflation, it will need to increase interest rates above our current rate of inflation.

So far this year, the Feds have raised the Federal fund rate three times, most recently with a .75--or \3/4\ percent--increase, which is the highest increase since 1994, but the Federal funds rate still only sits between 1.5 and 1\3/4\ percent.

Current rates are 1\3/4\ percent, and again, inflation is 8.6 percent and climbing. This suggests that the Fed has a long way to go in raising interest rates, and has a lot of work to do ahead. What isn't shown in this chart--and sometimes I am not sure if the Biden administration understands--are the consequences that come with raising rates.

Our economy will slow down, and it will be harder for Americans to start small businesses and to purchase homes. We are already seeing that happening. The cost of living will increase, and Americans will see hard times. This did not have to happen.

President Biden overinflated an already recovering economy by spending trillions on the American Rescue Plan, which included market- distorting policies that unnecessarily subsidized demand while restricting supplies by paying people to stay home.

Now, as I said, the President is relying on the Fed to fix it but, unfortunately, it is the American people who will be paying the consequences.

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