Driving home from the St. Louis airport last night, gas prices were over $4.60 at the first station I saw.  As I drove through St. Charles and into central Missouri it wasn’t any better. I didn’t see a station with gas less than $4.59. If your truck runs on diesel, you’re likely paying over $5.15 per gallon. By now, high gas prices are not surprising but expecting bad news doesn’t make it easier to pay prices many people can’t afford.

Because we all see it and deal with it every day, gas prices are the most obvious indicator of inflation. The cost of energy is also one of (if not the) biggest drivers of inflation. When the energy to produce an item is more expensive the cost of that item goes up.  When the price of shipping that item increases the price goes up even further.  Businesses often absorb the cost of short-term price increases but that is not an option when costs are this high for this long. I have cosponsored numerous bills like the American Energy Independence from Russia Act to increase U.S. oil and gas production. Immediately increasing our own energy production will lower the costs of almost everything we buy while ensuring more countries around the world are buying American oil and gas instead of depending on Russian, Saudi Arabia, or Iran.

The price of oil isn’t the only cause of inflation.  I believe it is driven by four main factors: energy prices, money supply/government spending, supply chain and labor disruptions, and rules and regulations. We have had several economists come to our Small Business Committee who agree with my assessment. Government spending and supply chain disruptions’ effects on inflation can be explained by the supply and demand curve. Massive amounts of money being dumped into the economy naturally drives down the value of the dollar.  Supply chain issues have resulted in a shortage of goods, making them more difficult and expensive to get.  There are solutions for both of those, but neither are immediate.  We’re not going to take money out of circulation, but we can prevent more reckless spending.  Fiscal responsibility from the federal government along with the Federal Reserve halting its massive treasury bond purchases will help the buying power of the money you earn. 

Supply chain issues are a worldwide problem, but that doesn’t mean we can’t do more to fix them.  You likely remember the pictures of dozens of ships sitting off the west coast waiting to be unloaded.  That wasn’t caused by international bottlenecks.  It was due to worker shortages in the U.S.  As I’ve said in earlier columns, when you pay people not to work, they’ll accept your offer.  We have Americans who have not paid rent and many of their bills over the last two years with no recourse.  They were paid more to stay home than they could earn at work and now they’re being told their college debt could soon disappear as well.  This all leads to people withdrawing from the workforce and leaving important jobs at ports and in freight unfilled.  The answer here is simple: stop incentivizing people not to work.  The other, longer-term solution is moving production out of China and back to the U.S.  We can’t be dependent on foreign countries, particularly communist regimes who are actively trying to overtake our economy, for the things we need to survive. It’s much easier to ship something from Union to Fulton than it is to get it from Shanghai by way of LA and Chicago.  The Tax Cuts and Jobs Act we passed in 2017 was achieving that goal.  Since the passage of that bill the U.S. has experienced zero major corporate inversions, which is when a company leaves the U.S. to be domiciled overseas.  Supply chains were also being moved away from China thanks to President Trump’s trade policies. If COVID taught us anything, it’s that minimizing business with China is always a good thing.

The last pillar of inflation which is rules and regulations doesn’t get as much attention as the others, but it is just as pivotal. Unlike gas prices or pictures of ships stranded in the Pacific it’s difficult to see the impact of government regulations and how they increase the price of everything you buy.  However, we can quantify that cost because the federal agencies have to publish the cost of compliance for each new rule or regulation they put out.  Based on the agencies’ numbers, during the Obama Administration the cost to comply with new regulations was about $100 billion each year.  During the Trump Administration the cost was zero because President Trump had an executive order stating that for every new regulation put in place two had to be repealed.  Again, these are the government’s numbers, not mine.  After President Biden’s first year in office the cost American companies had to pay to comply with his new regulations was over $200 billion. There are only two ways to cover those costs: cuts expenses which translates to cutting workers’ pay or raise the price of products.  It’s not a coincidence that the highest level of compliance costs in U.S. history is happening at the same time as record inflation.  It’s all tied together and has created a perfect storm that has settled in right over us. 

Inflation is a complicated, multifaceted issue, so it’s not surprising that there are differing opinions on its causes and solutions. But the United States can absolutely fix it.  We are still the most powerful nation in the world because we have the most powerful economy.  Inflation is predominantly a disaster of our own making, so it is up to us to lead ourselves out of it.  There are bills in Congress that will solve our problem.  We just need a little political courage and a whole lot of humility from the Speaker and Administration to put them in place.