Remember inflation? It's back

This day of reckoning had to come. The laws of economics might not be as immutable as the laws of physics, but they can't be ignored, either. An economy built on credit, a long-standing policy of impossibly low interest rates, an expanding money supply, expanding markets in developing countries, and a federal government running budget deficits so enormous they suck up all available money sooner or later will result in inflation.

We've all seen the inflation at the gasoline pump. Careful observers have already noticed it in grocery shelves. Now the news media have begun to take notice. We're already paying more for gasoline, meat, grains, vegetables and other necessities. It's likely that the inflationary spiral will spread throughout the economy, to all foods, appliances, building materials and other products. Even consumer electronics — from computers to cell phones — which have been immune from inflation as advances in design and manufacturing made computing power cheaper and cheaper, might see rising prices. As if high unemployment wasn't bad enough.

The realization that inflation has not been abolished should prompt Congress, if it needed any more incentive, to reduce the unsustainable federal budget deficit. Budget freezes will not be enough. Congress will have to bite the artillery shell (it's so much bigger than a bullet) and actually eliminate some programs. The Department of Agriculture's subsidies for sugar, corn and other commodities cost taxpayers billions without helping consumers at all. Grain subsidies and ethanol requirements boost corporate farm profits without improving gas mileage or providing consumer benefits. The military-industrial complex Eisenhower warned against in 1961 has developed a patriotic immunity while it drains America's treasury. Wildly proliferating Cabinet departments — Veterans Affairs, Education, etc. — make political statements at the expense of taxpayers while doing little to attain service goals. The United States gives away billions of dollars to state and local governments and to nonprofit agencies, as if it had billions to spare, when, in fact, it's worse off than the state and local governments, which don't have the prerogative of printing money.

Real, painful cuts will be necessary, or taxes will have to be raised sharply in order to close the budget gap and fight off the inflationary monster that threatens us all. What's worse: eliminating some cherished federal programs or seeing inflation destroy savings? What's worse: paying higher taxes or seeing inflation ruin economic security? In each case, it's the latter.