Fighting Inflation: Biden or the Fed?

In The Wall Street Journal today, William Galston talks about what President Biden needs to do about inflation (“Biden’s Moment to Face the Inflation Music,” Jan. 26):

“If I were president, I would be attacking it head-on, beginning with a major speech explaining what is happening and followed by regular public events highlighting efforts to attack various dimensions of the problem, from reducing the backlog at ports to recruiting and training truckers to making sure grocery shelves are stocked.”

Supply-side efforts are always helpful, though I would focus more on getting the government out of the way than getting it more involved.  The most important thing, however, is to remember is what Milton Friedman said over 50 years ago: “Inflation is always and everywhere a monetary phenomenon.” 

Which means the answer to inflation is less what President Biden does and more what the Federal Reserve does.  The Fed has been pumping money into the economy since the pandemic began, if not before.  If we are going to get inflation under control, this has to stop and interest rates need to rise.  The longer it takes for the Fed to do this, the more entrenched inflation will become and the more painful it will be to get rid of it – as anybody who lived through the seventies and early eighties knows.