Inflation Was a Choice. The Thermometer Did Not Cook Itself.

Carter wants Jerome Powell to take the blame for an inflation surge produced by fiscal stimulus, tariffs, energy prices, supply shortages, and concentrated corporate power. The thermometer did not cook itself.

Carter took to the pulpit this week to perform the old Beltway rite: a white-haired man in a good suit, eyes full of concern, telling the country that inflation was a moral failure of spending and stimulus. His ministers of the press nodded along. The sermon is tidy. Spend too much, print too much, forgive the deficit, and prices rise.

There is something to confess. It is just not what he thinks.

The CARES Act of March 2020 was $2.2 trillion, the largest single fiscal intervention in American peacetime history. The December 2020 omnibus added roughly $900 billion. The American Rescue Plan, signed March 11, 2021, added another $1.9 trillion, including $1,400 checks, extended unemployment benefits, $350 billion in state and local aid, vaccine distribution, and an expanded Child Tax Credit. Roughly $5 trillion in fiscal lift met an economy with broken supply chains and roughly 20 million jobs erased.

Demand-pull inflation was real. Lawrence Summers warned that the American Rescue Plan risked an inflation surge. Olivier Blanchard agreed. Summers called it “the least responsible macroeconomic policy we have had in the last forty years.” Whether that judgment was fair or not, the warning existed. The administration proceeded. Prices rose.

That is the true half.

It is not the whole mechanism. The bill is not all the inflation. The Federal Reserve was not the only actor in the room, and Powell did not sign the checks.

The Section 301 tariffs on Chinese goods were preserved, expanded, and in some cases raised. The Trump-era tariffs covered roughly $370 billion in Chinese imports, generally at 7.5% to 25%. The 2018 steel and aluminum tariffs were 25% on steel and 10% on aluminum. The Biden administration added tariffs on Chinese semiconductors, solar cells, electric vehicles, and medical products, with the tariff on electric vehicles reaching 100% and the solar-cell tariff reaching 50%.

Federal Reserve Bank of New York and Peterson Institute estimates put the tariff effect at roughly 0.3 to 0.5 percentage points on core CPI annually. That is not the whole inflation story. It is still an inflation tax on construction, canned goods, machinery, bridges, and every other American business buying an imported input. The tariff is not invisible because Carter prefers the word “spending.”

Then came energy. Russia invaded Ukraine in February 2022, and global prices for petroleum, natural gas, and refined products were repriced almost immediately. CPI energy rose more than 25% year over year and, in the worst months, above 40%. Food-at-home inflation later peaked above 11%. Energy is upstream of nearly everything: fertilizer, diesel, freight, heating, cooling, and transportation.

The oil majors did not respond to that shock by forming a prayer circle. ExxonMobil, BP, Shell, and Chevron used the post-pandemic recovery to post extraordinary profits. ExxonMobil’s 2022 net income was $55.7 billion, more than double its 2021 figure and the highest ever recorded by a Western supermajor. Refinery utilization remained below pre-pandemic levels. The Strategic Petroleum Reserve released roughly 180 million barrels during 2022 to soften the price shock.

This was not simply inflation as a natural disaster. It was inflation as a supply shock filtered through a market in which a few firms controlled essential capacity and could pass costs forward. The public paid at the pump. The companies posted the quarterly report.

Shelter is the cleanest case. Housing is roughly a third of the Consumer Price Index, and shelter inflation is sticky because housing cannot be conjured by editorial deadline. We stopped building enough homes. We starved public housing, let zoning metastasize into a scarcity machine, and allowed equity landlords to consolidate parts of the rental market. The pandemic-era fiscal lift accelerated a house that was already on fire.

Now Carter waves Paul Volcker around like a relic.

Volcker raised the federal funds rate to roughly 20% in 1981. Inflation had reached 14.8% in March 1980. Unemployment peaked at 10.8% in November 1982. The result included a double-dip recession, the Latin American debt crisis, farm bankruptcies, and Black unemployment above 20%.

Volcker broke inflation by crushing labor. That was not an accidental side effect. It was the design.

The Federal Reserve in the recent cycle raised rates to 5.25%–5.50%, and inflation came down substantially within roughly eighteen months. That contrast matters. The same economy did not require 20% interest rates because the inflation was not deeply embedded in wage contracts and expectations in the way the early-1980s wage-price spiral was. It was a demand-and-supply shock, driven by the policy choices above and by the war in Ukraine. Reversible rather than structural.

The fact that 5.25% did what 20% did in the early 1980s is itself a tell. Carter’s comparison is not history. It is a permission slip to make workers pay again.

It is not prudence. It is a choice about who pays.

Suppose, for the sake of argument, that Carter is right about the first question. Suppose the only question worth asking is what to do about the cost of living now. What does the supply-side wing offer?

Drill more. Permit faster. Roll back tariffs. Audit the spending. Cut taxes. The tariff rollback is the one item here that could directly help prices, although the same commentators who object to government spending generally do not want to surrender the Section 301 protection attached to politically fashionable industries. The rest has the exhausted quality of a 1977 memo recycled until the paper goes soft.

The tax-cut-and-extraction menu is not wrong because it is too radical. It is wrong because it changes who receives the gains without changing who owns the bottlenecks. It subsidizes the firms that set the prices and then calls the subsidy supply.

Here is a different menu.

Build public and cooperative housing at scale. Not vouchers alone. Construction. A standing federal housing authority, in the New Deal and Housing Act of 1949 tradition, could finance mixed-income public housing, limited-equity cooperatives, community land trusts, and cooperative developments. Put two million units of permanently affordable housing on the public balance sheet over a decade, financed at Treasury rates, with a path from co-op to tenant ownership.

The shelter problem is not mysterious. We have not built enough, and the homes we do build are increasingly treated as financial assets to be flipped, leveraged, and rented back to the people living in them. Public housing, limited-equity co-ops, and community land trusts change the ownership structure. They remove homes from the speculation machine while preserving family stability and, where appropriate, equity.

Build a postal or public banking alternative. Roughly 5% of American households are unbanked and about 19% are underbanked. Check-cashing companies and payday lenders extract billions from working-class budgets because the private banking system has decided that small-dollar customers are more profitable as fees than as clients.

The federal government already insures deposits and backstops the banking system. It simply declines to provide a basic public banking option, leaving the upside to four enormous banks and the risk to everyone else. The United States operated postal banking from 1911 to 1967. A modern version could provide demand-deposit accounts, bill pay, and small-dollar credit through the postal network.

The infrastructure exists. The choice is absent.

Finance worker-cooperative conversions. Roughly a million closely held businesses close or change hands each year as their owners age out. Many could be bought by the employees, but the financing structure for that buyout barely exists.

Create a federal conversion fund with low-cost patient capital and technical assistance. Evergreen Cooperatives in Cleveland, the Mondragon federation in the Basque Country, and Italy’s Marcora Law show the basic model: when a firm closes or falters, workers can become owners rather than discarded inventory. Mondragon employs roughly 70,000 people across about 80 cooperatives and generates more than €11 billion in revenue. Its average internal pay ratio is around 5-to-1. Fagor’s bankruptcy in 2013 proves that worker ownership is not magic; about 1,700 of its roughly 1,800 Spanish worker-members were relocated into other cooperatives. Failure still happens. The people do not have to be treated as the failure.

Strengthen union bargaining rights. The PRO Act, first-contract arbitration, and sectoral bargaining in care work, retail, logistics, and food processing would give workers a way to bargain over the price of labor rather than accept the price handed down by the largest local employer.

Union membership in the United States is roughly 10%. Belgium’s bargaining coverage is about 51%, Sweden’s about 65%, and Denmark’s about 67%. The countries with the strongest bargaining institutions did not abolish markets. They gave workers enough leverage to negotiate inside them. A union is a farmers’ co-op with a different product. Nobody calls grain farmers Bolsheviks when they bargain collectively with a concentrated buyer.

The wage-side answer to the price-side problem is bargaining power, not a sermon about resilience.

Offer public energy. Not nationalization of every power plant. An option. Federal investment in transmission, low-interest loans to municipal utilities, and competitive public wholesale supply could reduce the refining, generation, and retail margins that sit between energy production and the household meter. Public power already exists in roughly 2,000 American municipalities. The Tennessee Valley Authority is the model. Rural electric cooperatives serve about 42 million Americans across more than half the country.

Again, the infrastructure exists. The choice is absent.

Then enforce antitrust law against concentrated pricing power. Meatpacking is dominated by four firms. Container shipping is controlled by three major alliances. Refining is concentrated among a handful of firms at the national level. During the 2021–22 inflation surge, sectors including meatpacking, container shipping, retail petroleum, and infant formula saw extraordinary margin pressure and pricing power. The Federal Trade Commission, the Department of Justice, and state attorneys general already possess tools to challenge concentration. The missing ingredient has been political will.

The Federal Reserve’s own research has examined firm-level markups and the role of pricing power in the post-2021 acceleration of prices. The question is not whether every price increase was gouging. It is whether a market with three or four serious firms in a vital category should be trusted to discipline itself. That is not a market. It is a small committee with a logo.

This is a supply-side program. It reduces costs by building capacity, expanding ownership, and breaking bottlenecks instead of subsidizing the firms that own them.

The difference is ownership.

The supply-side menu Carter offers rearranges who receives the rents. The menu above rearranges who owns and runs housing, credit, energy, and labor. Those are different propositions. The first requires no confrontation with the existing ownership structure of the American economy. It is safer for the people already holding the keys. It is also the menu that produced the rent burden, the medical debt, the childcare bill, and the household balance sheet the median voter is complaining about.

Carter confessed to a fiscal sin he did not commit and stayed silent about the policy choices he did. The confession he owed was not a sermon about thrift. It was an admission that inflation is not weather, and the cure is not to crush the people who have the least room to absorb another bill.

The economy is a set of choices, not the weather. The bills were signed. The tariffs stayed. Energy was concentrated. Housing was withheld. Labor was weakened. The Fed raised rates because someone had to pay.

The thermometer did not cook itself. The cook is in the kitchen, and the old menu is still on the table: tax cuts for the top, extraction from the bottom, and a polite insistence that no other meal exists.