Rep. Fortenberry Wrongly Blames High Gas Prices On Federal Reserve Policy

April 13, 2011 5:35 pm ET — Walid Zafar

Speaking on the House floor last night, Rep. Jeff Fortenberry (R-NE) suggested that the Federal Reserve's monetary policy was behind recent increases in gasoline prices.

FORTENBERRY: The level of spending is unsustainable. Businesses can't do it, a family can't do it, a government should not be able to do it. Because the consequences are really three-fold and they're no longer hidden, they're out in the open. This amount of debt and deficits creates basically three problems. One, it pushes off the obligation for the way in which we are currently living and spending onto children and grandchildren in terms of taxes on them. It's unjust. The second problem creates the potential for inflation. There's already an argument going on that the Federal Reserve policies are monetizing our debt, basically printing money. And now you're seeing commodity inflation, with price hikes and gasoline and other commodities. The effects are very real. The third problem is, we're transferring ownership of America to foreign countries.

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If the central bank pumps too much money into the economy, prices will rise. But that's not what's happening in the United States; the inflation rate is actually really low.

Fortenberry associates commodity shocks with core inflation, which is wrong. In fact, a recent report by the Federal Reserve Bank of Chicago shows that commodity shocks, like those we are experiencing, don't correlate with core inflation, which is a general increase in all prices. In other words, an increase in the price of corn or wheat does not mean that there is general inflation in the economy; it means something is going on with the corn or wheat market.

Recent increases in gas prices, explains Republican economist Douglas Holtz-Eakin, are the natural result of economic recovery. "As economies recovered, it was inevitable that prices were going to rise. And this was utterly foreseeable," Holtz-Eakin explained to CNN's Candy Crowley several weeks ago.

As James Surowiecki explains in the New Yorker, "If the Federal Reserve overreacts to higher oil prices and goes into full inflation-fighting mode-raising interest rates, as the European Central Bank did, foolishly, last week-it would risk slamming on the brakes just as the economy is finally getting into gear."

For more on gas prices, check out our fact check.

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