Fighting Inflation Requires Fiscal Discipline from Congress, Not Just Fed Rate Hikes
Source: https://www.facebook.com/americanspectator/. "Americans Are Right: Inflation Is Not Just the Fed’s Problem | The American Spectator | USA News and Politics." September 17, 2026. spectator.org
The Gist
The author argues that raising interest rates alone won't fix inflation—Congress also needs to get serious about cutting deficits and reforming spending, especially Social Security and Medicare, because government borrowing and debt make inflation worse over time. She points to the 1980s, when it wasn't just tough Fed policy that beat inflation, but the belief that Washington would eventually get its fiscal house in order.
Conclusion
Inflation cannot be durably defeated by the Federal Reserve alone; Congress must also commit to fiscal austerity and deficit reduction, or inflationary pressures will persist and even worsen.
Premises
- Inflation remains well above the Fed's 2 percent target despite the Fed raising interest rates, and voters are rightly frustrated by both the inflation and the cure.
- When the Fed raises interest rates without accompanying fiscal restraint, the government's interest payments on the national debt grow, increasing borrowing and future claims on tax revenue—creating a vicious cycle that fuels inflation further.
- Historical precedent (Volcker-era disinflation in the 1980s) shows that lasting success against inflation required not just Fed rate hikes but credible signals from Congress that fiscal correction was coming, via legislation like TEFRA, Social Security reform, and tax reform.
- Currently, Congress runs deficits at 6 percent of GDP, well above the historically sustainable 3 percent level it has hit before, undermining confidence in future fiscal restraint.
- The Congressional Budget Office's scoring methods obscure the true cost of legislation by ignoring debt-service costs, allowing lawmakers to pass bills that appear budget-neutral but are not.
- 70 percent of the federal budget is mandatory spending, and the entire projected growth in the deficit stems from Social Security and Medicare, meaning entitlement reform is unavoidable for real fiscal correction.
- New NBER research shows many workers suffered severe, unrecovered real wage losses during the inflation surge, illustrating the tangible costs of unchecked inflation and the stakes of failing to address it comprehensively.
Assumptions
- Fiscal deficits and debt levels have a meaningful causal effect on inflation, not just on interest costs.
- Market expectations about future fiscal policy influence current inflation dynamics (rational expectations-style reasoning).
- Political will to cut deficits and reform entitlements is achievable, despite being historically difficult.
- The Volcker-era analogy is applicable to today's economic and political context.
- Reducing regulations to boost growth will meaningfully increase revenue without significant offsetting costs or trade-offs.
- The Fed's monetary policy and Congress's fiscal policy are the primary levers relevant to controlling inflation, downplaying other factors like global supply shocks or corporate pricing behavior.