Budget & Tax
Inflation means tough decisions ahead
November 1, 2021
A dollar just doesn’t go as far as it used to. This isn’t about reminiscing on the good ole days, but rather is a comment on the reality that inflation over the past 12 months has climbed to a rate not seen for decades. Higher prices are impossible to ignore.
Increased government spending along with increased consumer demand across the country have been the driving forces behind the rise in prices. Oklahoma has likewise seen increased economic activity resulting in higher wages for consumers and increased collections for state government.
This economic activity may not last long, however. Economic growth was measured at just 2 percent for the third quarter, down from the 6.7 percent rate in the second quarter.
Increased federal spending—specifically, the Biden spending package being discussed—will push inflation even higher. This ramping up of inflation paired with slow economic growth could lead to stagflation.
Over the first few months of the current fiscal year, state revenue collections have grown nearly 14 percent compared to last year. While high inflation may eat into some of that growth, that should not give state leaders an excuse to say these high collections don’t mean anything.
Higher prices mean taxpayers may have to make tough decisions about how they spend their money. State government should have to do the same. Attempting to avoid making the same tough decisions that taxpayers are having to make would be the wrong move. State government has no right to ask for more when the taxpayers who support it have less.