David Malpass: we need spending, regulatory restraint to fix inflation

David Malpass is someone worth listening to when it comes to getting inflation under control. From 2017-19, Malpass was Undersecretary of the Treasury. From 2019-23, Malpass was the president of the World Bank. Today, the WSJ published Malpass's op-ed on the subject of getting inflation under control.

The key point in the article hints that the current model on getting inflation under control "blames growth and jobs for price hikes." That's obviously disproven since we had solid, though not prolific, growth in the Trump administration. Lots of jobs were created pre-COVID, too. The result was the CPI hitting 1.4% the day that Biden took office.

Rather than relitigating Trump's policies, it's better to examine the things that've worked time-after-time over the years. A stable dollar and regulatory restraint always help lower inflation. Lower tax rates help, too. This time, there's another thief that's stealing our money through inflation. This time, that culprit is out-of-control spending:

The Federal Reserve’s monetary policy is broken. Normalization of interest rates has been needed for years to allow markets, not regulators, to allocate capital. But with interest rates at 5.5% and the dollar strong, the inflation battle must shift to the problem of government spending and regulation. The Fed’s silence on the fiscal and regulatory roots of this inflation crisis, and its insistence on using an antiquated inflation model that blames growth and jobs for price hikes, risks an even weaker U.S. economy.

America’s two immediate inflation risks are rising fuel prices and wage costs, both of which are attributable to government. Constrictive regulations on natural gas, nuclear energy, pipelines and electrical grid maintenance have limited energy supplies unnecessarily. Unprecedented entitlement spending held down the labor-force participation rate, as labor disruptions and regulations to increase the power of union organizers added labor costs without increasing productivity or helping workers.

Since few people in this administration have private sector experience, nobody has the credentials required to tell Biden that he's wrong. Nobody's in a position to tell him about the policies required to build a sturdy economy. He'd be wise to heed the information in this paragraph:

Far from easing economic distress, the Fed’s plan to raise interest rates if inflation persists would hurt the economy as a whole. Headlines applaud the economy’s resilience, but at 2.1% growth, it’s weak by historical standards and projected to stay that way. Gross domestic product is being propped up by record government spending that counts toward GDP now but provides little support for future growth and adds to the national debt. The economy is filled with danger spots. Many parts of the private sector are completing projects that were funded before the rate hikes but aren’t planning new investments because of high interest rates and weak growth expectations.

It's time to slow the rate of spending significantly and to pass this year's appropriations bills that start to put us on a path to a balanced budget. Cutting excessive spending, which the Biden-Pelosi administration specialized in, isn't just the right thing to do. It's what's required to avoid a financial catastrophe. In this interview with Larry Kudlow, Newt Gingrich explains how we balance the federal budget:

Gingrich said that it requires a balance of 70% GDP growth and 30% spending restraint. That isn't possible with Bidenomics. Bidenomics is based mostly on redistribution, not growth. Cutting regulationsm cutting taxes and exercising fiscal restraint gets us to the promised land. That's entirely possible with most of the top-tier GOP candidates. (I'm skeptical with Trump only because he's been president and he didn't exercise spending restraint in that term. Still, I think it's possible with him, too.)