The latest inflation numbers, reporting that December prices increased 7 percent from a year ago, will add to the pressure on the Fed and on Congress to hike interest rates and kill plans for increased public investment. This reading of the numbers and the needed policy responses is entirely perverse.

As we keep reporting, most of the inflation is the result of supply chain bottlenecks and the opportunistic use of those bottlenecks by hyperconcentrated industries to raise prices. Even Fed Chair Jerome Powell testified yesterday that he expects inflation to subside later in 2022.

If we are ever to fix the supply chain mess, we need to bring home a lot of industries. That will take the kind of public investment proposed in Build Back Better, as well as re-regulation of predatory industries that make up the links in the chain.

Take a close look at the sectors where prices have increased most. They are mostly the result either of purely temporary supply bottlenecks (cars, semiconductors), or of opportunistic price hikes (shipping, meat), or of manipulated supply and demand (oil). Only a minority, such as lumber, conform to the standard story line of increased demand raising prices.

And though most media accounts stressed the bad news, on a seasonally adjusted basis prices increased just 0.5 percent in December, down from 0.8 percent in November.

The unwillingness of low-wage, frontline workers to work in hazardous conditions for a pittance has raised labor costs, some of which have been passed along in higher prices. But this is a long-overdue gain.

Higher wages are a problem only if you think that the worker earnings that prevailed two years ago were acceptable. Cut corporate concentration, stock buybacks, and the grotesque concentration of wealth, and there will be more money to compensate workers without raising consumer prices.

If policymakers follow the conventional wisdom, we could end up with a variant of 1970s stagflation—higher unemployment and weaker economic performance. That economy delivered the 1980 election to Ronald Reagan.

Biden has recovered his voice on the January 6 attempted coup and on the need for scrapping the filibuster to deliver voting rights. He needs to speak out more forcefully on what’s really going on with the economy.