“I think it is pretty gimmicky, these price gouging bills, because you know, you’ve got a lot of extra demand,” Furman said. “What happens when demand goes up? Prices go up.”
The average American is likely paying an extra $ 311 a month because of inflation, according to a recent Moody’s Analytics analysis. The financial squeeze stems from the rising cost of everyday goods, including cars, rent, food, gasoline, and health care.
“There is an old saying, the cure for high prices is high prices,” Furman said. “That’s a little bit of a painful thing to deal with, but it is what elicits the additional supply, it brings more producers into the market, and it is what brings prices down.”
“We need to let that process work,” the economist continued. “You try to interfere with it, you are going to make things worse. We tried that in the seventies, it was a big failure. We shouldn’t be repeating it again.”
Inflation accelerated again in April, the Labor Department reported last week, with the consumer price index rising by 8.3%. While that is down a bit from the 41-year high notched in March, it was much higher than economists expected.
Furman said that while President Biden’s American Rescue Plan has helped the U.S. economy recover faster than any other economy, it is also partly responsible for our “incredibly high inflation.”
“I wished at the time that he would – he did something smaller. I think it was larger than it needed to be, but it was good that something happened.”
Furman placed blame on the Federal Reserve for “a bunch of mistakes” after Biden’s plan was signed into law in March 2021.
“[The Fed] was behind the curve for most of last year,” Furman said. “It kept thinking the inflation was transitory, it kept not moving to normalize rates, and now you add on top of that President Putin’s invasion of Ukraine, and that’s like the cherry on top of this terrible concoction we already had.”
Fox Business’ Megan Henney contributed to this report.