Larry Kudlow: Another plan to fight inflation

Today’s CPI Inflation Report came in a lot stronger than people were expecting and indeed there were plenty of signs that inflation is not only not peaking but is actually accelerating. I’ll come back to that in a moment, but I feel it is my duty to report President Biden’s response. “Exxon made more money than God this year,” and then he went on to blast the oil companies for not drilling.

Why don’t they drill? Because they make more money and buy back their stocks that should be taxed. I’ll paraphrase his indecipherable word salad, but that’s the gist – Big Oil is to blame.

Later, his NEC director Brian Deese said if you really isolate what’s going on here, Vladimir Putin has decided to fight this irresponsible war.

There you have it: the blame game – Big Oil, Big Pharma, Big Poultry, Big, Big, Big, blame and of course Putin.


food price inflation

A man shops at a Safeway grocery store in Annapolis, Maryland, May 16, 2022, as Americans brace for summer sticker shock as inflation continues to rise. (Photo by JIM WATSON/AFP via Getty Images/Getty Images)

What’s driving inflation, of course, is the delayed impact of massive federal spending, borrowing, and money printing, plus Biden’s radical environmental policies that have made it virtually impossible to get permits for just about anything — oil, natural gas, pipelines, freeways, roads, bridges, even wind and solar farms are being halted by the bright-eyed policies of the most radical EPAs in history. And then add the energy and home ministries, which share the same Green New Deal agenda.

So oil companies are reluctant to make long-term investments because they read the papers and they watch our show and they know all about the Biden war on fossils and they assume that after Biden’s over there might not be a fossil industry anymore. Honestly, I can’t blame them. Can you?

Anyhow, it turns out that over the past three months, the topline CPI is up 10.7% at an annualized rate, which is a few points above the 12-month rate of 8.6%.

Core prices (excluding food and energy) rose 6.3% over the past three months, which is higher than the 12-month change of 6%.

Hold on guys, I’ve got more numbers to go. Aside from food and energy, housing and shelter prices are picking up – 6.7% over the last three months compared to 5.5% last year. Another bad trend.

Prices for services, not good, but services: up 9% in the last three months, compared to 5.7% for the year, and even if you took energy, services are up 8%, compared to just 5 .2% for the year.


Used car prices are booming And so are the new car prices. Healthcare costs are starting to rise and electricity and utilities are off the charts. Electricity, for example, is up 18.3% over the past three months, compared to 12% for the year.

Consumer confidence has slumped in the University of Michigan report today and inflation expectations have risen again on this report. The Atlanta Fed’s wage tracker is now up 6.1% in May. That’s another annoying number and the other day, Janet Yellenour friend from the hostage video claims that Europe and all major countries have the same inflation problems as we do in the US, but that’s a big lie.

A few months ago, the San Fran Fed showed that core inflation in the US was more than double that in the OECD countries, and former Clinton-Obama economist Jason Furman showed in a recent WSJ commentary that that the US had about 3% points more cumulative inflation than the Eurozone since the start of the pandemic.

In fact, as I mentioned, US core inflation rose 6.3% in May while the Eurozone is only 3.8%, and US wages are growing about twice as fast as the Eurozone. This is largely because our fiscal policy has created significant excess demand in the US, while Europe’s nominal GDP remains several percentage points below trend.

Messrs. Furman, Sommers and Ratner have repeatedly warned against overspending, but neither Ms. Yellen, nor Mr. Deese, nor their boss, Mr. Biden, will admit that, and never owning it means never understanding it.

Well, I remember the famous movie quote from years ago, “Being in love means never having to apologize,” but being in high inflation is really a different matter.


Janet Yellen Inflation

Treasury Secretary Janet Yellen speaks during a Senate Banking Committee hearing on Capitol Hill in Washington, Tuesday, November 30, 2021. (AP Photo/Andrew Harnik/AP Newsroom)

Another thing Ms. Yellen refuses to know is that when she testified before Congress last week, she continued to push the Biden budget for FY23, which included at least $5 trillion in new spending and $3.5 trillion of higher taxes – both would increase inflation massively and of course real wages continue to fall by over 3% with today’s report and honestly the economy is just about to break even after growing 1.5% in Q1 has fallen.

Atlanta Fed’s latest GDP tracker reads 0.9% for Q2. Most regrettably, the Federal Reserve, which made a egregious mistake along with the Bidens a year and a half ago, must now adopt much more aggressive policies to raise its target interest rate and pull cash out of the economy.

To quote my buddy Steve Forbes, “If they can print money, they can deprint it.” There may be no way out of this inflationary recession scenario, but as an optimist, I have a different plan.


First, make Trump’s tax cuts permanent and also lower personal tax rates in simplified code. That would increase the production side of the economy.

Second: Deregulate energy and industry everywhere and also boost the supply side of the economy. Third, freezing domestic spending. Fourth, defend the value of the king dollar. Wrapped in a balanced budget, this will spur growth and dampen inflation. It doesn’t have to be more difficult.

The cavalry is coming.

This article is an adaptation of Larry Kudlow’s opening commentary on the June 10, 2022 issue of “Kudlow.”

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