Inflation, 2.07% yearly

Rates, annual, for all consumer items this year:

1.58%

1.13%

1.51%

1.95%

2.13%

2.07%

The BEA says most of the inflation was energy and food (4/5 of it).  Half of the food inflation was likely the California drought. Is this bad or good? I think the price distortions were within reason, they were adiabatic, not likely to cause structural disruptions.

Will this inflation generate tax revenues in DC? The question here is; can Congress sneak by without a budget confrontation thru the mid term elections? Maybe. If we get a real GDP growth of 2.5% then Congress can fudge the budget issues. But the coefficient on tax income is not linear. It drops dramatically with low growth because the high income tax bracket is based on merchant income. If Congress dips into the market too swiftly, rates and prices rise. The Fed gets bounded.