Sarah Palin and Wall Street Journal in a food fight: Who's right?
Sarah Palin battles The Wall Street Journal over whether grocery prices are rising. A reporter there says no, but Palin's got ammo for her assertion of inflation at the cereal shelf.
Well, ex-governor Palin is correct in asserting that the paper’s own coverage indicates that inflationary pressure may be building up in the category of food. But The Wall Street Journal – or, more properly, the Wall Street Journal reporter who criticized the content of Palin’s Monday speech on economic policy, is correct in that such inflation has not yet showed up.
And that latter point was the central issue in dispute, so in this case, we’ll side with our fellows in the lame stream media.
OK, let’s start from the beginning. In a speech to a trade association convention in Phoenix, Palin took aim at the Federal Reserve’s recent announcement that it will buy $600 billion in Treasury bonds in an attempt to stimulate the economy.
The Fed hopes that this will give banks extra money to lend, sparking economic growth, said Palin. But lack of liquidity is not the problem, she said.
“The problem isn’t that banks don’t have enough cash on hand – it’s that they don’t want to lend it out, because they don’t trust the current economic climate,” said Palin.
And since the Fed is basically printing money to buy those bonds, the move could lead to inflation, said the former Alaska governor.
And now here comes the crucial part. Palin continued by saying, “All this pump priming will come at a serious price. And I mean that literally: Everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher.”
The problem is, food prices have not risen significantly over the past year or so. Wall Street Journal economics blogger Sudeep Reddy pointed this out in a post Monday night, saying that Labor Department figures show that food prices rose at an annual average rate of less than 0.6 percent through the first nine months of the year.
The article in question noted that “an inflationary tide is beginning to ripple through America’s supermarkets and restaurants,” Palin noted. She wondered whether Wall Street Journal reporters read their own newspaper.
Mr. Reddy did not really address the whole reading thing in his reply. But he said the article in question noted in its beginning that so far 2010 has been “the tamest year of food pricing in nearly two decades.” Its point was that this trend might be ending, and inflation building. But we don’t know that for sure because it hasn’t happened yet.
As for her general criticism of the Fed’s move, Palin was within the bounds of Republican economic orthodoxy. As she noted in her speech, Ronald Reagan called inflation “as violent as a mugger.”
As to whether Fed Chairman Ben Bernanke should be worried, well, Palin is not yet even a presidential candidate. Perhaps he is more concerned about Rep. Ron Paul (R) of Texas, who is in line to become chairman of the Financial Services Committee’s Subcommittee on Domestic Monetary Policy.