Rick Newman

Mission accomplished?

That's the tacit message the Federal Reserve and its chairman, Ben Bernanke, have been sending, now that the economy is recovering and companies are starting to hire again. As every Fed-watcher knows, the Fed plans to end its second bond-buying, or "quantitative easing," program at the end of June, which presumably means it will revert to more conventional forms of monetary policy. "The Federal Reserve has taken extraordinary measures under extreme circumstances," Bernanke said at his recent press conference. The Fed's intention now, he said, is "to tighten policy at the appropriate time," which normally would mean raising interest rates.

[See 10 industries that will hire the most in 2011.]

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John Boehner is no George H. W. Bush. At least that's his line for now. The Republican House Speaker has famously insisted that new taxes are a "nonstarter" in negotiations over how to slash the federal debt. Unlike Bush, who relented on his 1988 campaign pledge not to raise taxes and lost the presidency after one term, Boehner insists that he'll never be that wishy-washy. Read his lips.

[See where to work if you want a raise.]

Nice rhetoric. But lousy math. Boehner and his GOP allies apparently envision some kind of utopian America in which efficiencies and fairy dust magically solve a gigantic mismatch between what the government earns and what it spends. Spending cuts obviously need to be part of the solution, but if they were the only solution, America would become a place unrecognizable to many of its citizens. Popular social programs like Medicare and Social Security would end up gutted. Poverty would skyrocket. Homeownership rates would plummet. The U.S. military would shrink to half its current size, or less.

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It's not usually welcome news when the landlord hikes your rent. But a surge in rents this year represents a counterintuitive bit of good news for the economy and perhaps even for the beleaguered housing market.

[See the 10 weakest rental markets.]

Like home prices, rents fell nearly everywhere during the recession, as millions of people moved in with parents or found roommates to cut their housing costs. But with the gradual improvement in the job market and the overall economy, grown kids are finally waving goodbye to their parents and many others are moving into a place of their own. That's pushing high vacancy rates back down, toward levels they were at before the recession—and sending rents back up. Research firm REIS estimates that rents will rise an average of 3.6 percent in 2011. In a few hot areas, like parts of Washington D.C., and New York City, rent hikes could exceed 10 percent.

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It's been an unwelcome hardship at the wrong time. Just as the economy has turned the corner and consumers have begun to dig themselves out, price hikes for gas, food, and other key products have taken the air out of the so-called recovery. But there's good reason to think that those demoralizing price spikes may be temporary, with moderating inflation giving consumers a second wind by later this year.

[See where to work if you want a raise.]

Inflation has been an undeniable problem for a lot of families in 2011. As every motorist knows, gas prices have jumped by about 30 percent this year, with the average pump price perched just beneath the unnerving $4 threshold. Food prices have risen by about 6 percent over the last 12 months, with some everyday items, like beef, coffee, and butter up by more. Spikes in the price of certain commodities, like copper, cotton, and rubber, are raising the cost of products ranging from clothes to cars, with manufacturers increasingly trying to pass the pain on to consumers. The sting wouldn't feel so sharp if wages were rising at a healthy clip. But many families are getting by on flat or even falling incomes. So even modest inflation hurts.

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