A new economic study has delivered a damning verdict on the causes of post-pandemic inflation, pinning the blame overwhelmingly on excessive government spending and Federal Reserve policy rather than the widely cited supply chain disruptions.
The Demand-Driven Inflation Thesis
Economists Domenico Giannone of Johns Hopkins University and Giorgio Primiceri of Northwestern University found in a National Bureau of Economic Research working paper that roughly 90% of the inflation surge in 2021-2022 was driven by overheated demand. Their research attributes only about 10% to supply-side constraints.
The paper directly challenges the dominant narrative pushed by the Biden administration and much of the financial press during the inflation crisis. President Biden repeatedly blamed “supply chain” issues, while Federal Reserve Chair Jerome Powell initially dismissed inflation as “transitory.”
How Stimulus Fueled the Fire
The researchers argue that the $1.9 trillion American Rescue Plan—passed in March 2021 when the economy was already recovering—flooded consumers with cash at a time when pandemic restrictions were lifting. This created what they call “unexpectedly strong demand forces” that overwhelmed the economy’s capacity.
The Fed compounded the problem by keeping interest rates near zero through March 2022, even as inflation hit 7% annually. The paper suggests this accommodative monetary policy helped sustain price pressures that might otherwise have eased.
The Supply Chain Scapegoat
At the height of the crisis, media outlets like The New York Times frequently framed inflation as primarily a supply-side problem. A January 2022 Times headline declared “Supply chain snags continued to drive up prices in December,” while columnist Paul Krugman argued that stimulus spending played only a minor role.
Even when later research suggested demand was the bigger factor, coverage often downplayed the finding. An August 2022 Times article buried the lede that demand accounted for 60% of inflation—still an undercount compared to the new 90% estimate.
Why the Diagnosis Mattered
The flawed initial assessment had real consequences. If inflation was truly caused by temporary supply issues, as Powell and Biden claimed, aggressive Fed tightening might seem unnecessary. The delayed policy response allowed inflation to become entrenched.
The new research suggests that much of the economic pain of the past two years—including the Fed’s eventual sharp rate hikes—might have been avoided with more restrained fiscal and monetary policies in 2021.
Source: www.breitbart.com — https://www.breitbart.com/economy/2026/11/09/breitbart-business-digest-the-vindication-of-the-bidenflation-thesis/