Lupe Lopez, a grocery store owner in my district in California, recently showed me how devastating inflation has been for her and her customers. Milk cost $4.95 a gallon, an increase of 38 percent since 2019, and tortilla packets were $3.07, up by 24 percent. During my visit, I met a first-time parent who said he drove to three different stores to find baby formula. A mother of five children told me she could no longer afford milk for her teenagers. Inflation is spiking and causing real pain and hardship in my community and across our country.
How did we get here? More than two years of a devastating pandemic led to slowdowns in the production and delivery of goods. This was made somewhat worse by supply uncertainties brought about by Vladimir Putin’s war in Ukraine. We also have excess demand relative to supply because of fiscal and monetary policies that were implemented to prevent a severe recession. As the saying goes, we have “too much money chasing too few goods.”
At this point, no one wants to hear politicians bicker about inflation’s cause. They want to hear about how we can fix it.
President Biden recently outlined his ideas to address inflation. I support the president’s efforts, but we need a bolder vision and faster action. Ms. Lopez and my constituents expect the government to get prices back under control, and they want us to do it quickly.
To meet the moment, Mr. Biden should convene an emergency task force empowered to lower prices and address shortages. We need an all-out mobilization, not just a few ad hoc initiatives reacting to headlines. The task force should include relevant cabinet members like Treasury Secretary Janet Yellen, Secretary of Agriculture Tom Vilsack, Secretary of Transportation Pete Buttigieg and Secretary of Energy Jennifer Granholm. It should also have state and local officials, along with business and labor leaders from sectors experiencing significant inflation.
The most urgent goal of this task force would be to lower and stabilize short-term prices of volatile goods like food and fuel. We can do this through pre-emptive buying, a tool we’ve used since World War II. The Department of Agriculture should purchase essential food products on the global market during significant price dips, which often occur multiple times a month or even every week, and resell them cheaply to Americans. The department should contract with private wholesalers for distribution, as it has done for decades to avoid storage or logistical challenges. Because the government would be buying and selling large quantities of food when they are cheapest, this would lower and stabilize prices for key grocery store products within weeks.
Although continuous government purchasing can increase aggregate demand, buying only during the dips will neutralize price volatility and lock in low prices. Economists call this smoothing. Only the federal government is large enough to do it. This won’t involve anything like price controls that violate market fundamentals. Our executive branch has the authority to do this: Presidents from Jimmy Carter and Ronald Reagan to Barack Obama and Donald Trump have instructed the Department of Agriculture to spend billions on dairy purchases to influence prices.
The task force must address the needs of young families as well, who see empty shelves when looking to feed their newborns. We should have anticipated this in February when Abbott closed its infant formula plant. In addition to what the president has ordered to supply ingredients and transport formula, we must finance the production of baby formula itself at multiple manufacturers to get the product back in stores as fast as possible.
The government should also purchase surplus baby formula in large quantities from Europe and create a mutual recognition system; formula safe for babies in Europe is also safe for American babies. If we could go from making fewer than 1,000 warplanes before World War II to 96,000 per year just a few years later, we can have enough baby formula to meet the need within two months.
Next, the task force should leverage public sector strengths to deliver other supplies Americans need. The president set a good precedent by mobilizing the military for Operation Fly Formula. The National Guard and other military units should be deployed to address immediate worker shortages that have left container ships stuck at sea and warehouses overflowing.
To recruit new workers, we must issue clear regulations to permanently improve their working conditions and provide generous wage subsidies for American workers during the shortages. This is a familiar idea; we currently spend billions on farm subsidies to boost and maintain crop production. We can afford to invest in agricultural and transportation workers to increase the supply of critical products.
Congress has a role to play in the long run, too. We should pass the Bipartisan Innovation Act before the end of June so that America can manufacture more semiconductors for our cars and laptops. This would be the first step in a lasting commitment to a national economic strategy of re-industrialization, of becoming a producing nation again. To remain the pre-eminent economy, we need enough capacity to handle supply chain disruptions without entire industries being upended.
There is no patience for incrementalism or political spin about economic numbers in these times. Democrats can’t just blame the Republicans for lacking a plan. People elected us to solve problems. We told them that government could improve their lives and they want to see tangible action, movement and energy out of Washington.
Let’s reject the orthodoxy that makes us timid and dilatory about government intervention and show that our government is still capable of decisive action when it comes to both demand and supply.