Inflation has started roaring back since Biden became President
If your eyes usually glaze over at economic statistical news, then the Dollar Tree retail chain’s recent announcement should drive home the reality of inflation’s comeback. The last of the major “Dollar Store” chains, retailers selling all items for $1 or less, Dollar Tree, announced it was “breaking the buck” by adding $1.25 and $1.50 price points.[i]
The chain has been able to keep prices at $1.00 since its founding thirty years ago, even though 1986’s dollar is worth approximately $2.30 today due to inflation. No longer. Their bargains will now cost more.
Not so coincidentally, this past Friday, the Bureau of Economic Analysis reported that inflation hit the highest rate in 30 years. The core personal consumption expenditures price index increased by 4.3% on an annual basis and 0.4% for August. [ii] And Monday, the U.S oil benchmark price rose to its highest level since 2014. [iii]
Inflation is running rampant in Joe Biden’s America. Using another set of metrics, the Bureau of Labor Statistics (BLS) reported earlier in September that consumer prices increased by 5.3% on an annualized basis in August. [iv] In January 2021, before Joe Biden took over the presidency, annual inflation rose at a more stable 1.4 percent rate.
What has President Biden’s response been? Originally it was to claim that inflation would be temporary. In July, he said: “We’ve seen some price increases. Some folks have raised worries that this could be a sign of persistent inflation. But that’s not our view. Our experts believe, and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary. “[v]
However, more recently, the Biden Administration seems to have thrown in the towel at claiming that inflation is just temporary. Now they have begun finger-pointing against businesses, such as the meat industry, alleging “profiteering.” [vi]
Biden may want to consult with his own “experts,” the White House Council of Economic Advisers, who note that housing is a big portion of expenditure and hence makes up about a third of the CPI index. “Our analysis, however, suggests that these higher shelter prices are likely to soon show up more clearly in the monthly CPI.” [vii] In short, rising rents and home prices mean that further inflation increases are effectively already in the pipeline for the future.
Not only does inflation harm consumers by increasing household costs, but it can also have long-lasting economic damage. Inflation operates as a pay cut for the consumer when wages do not keep up. Historically, the poor have suffered the most from inflation since their incomes typically lag the most.
Americans already appreciate the dangers. According to recent polling by Pew Research, most adults (63 percent) say they are very concerned about rising food and consumer goods prices. That is larger than the shares citing other economic issues – employers being unable to hire workers (42 percent very concerned), people facing eviction or foreclosure (35 percent), or people who want to work being unable to find jobs (29 percent). [viii]
Fox News has obtained similar polling results. Among voters, 86 percent were concerned about inflation — and they see lots of reasons for it. Seventy-nine percent blame the government’s economic policies. Fifty-three percent say increases in housing costs are creating family financial hardships. Concern about higher food prices is also widespread (70 percent) and gas (67 percent). [ix]
Continued inflation could force the Federal Reserve to reverse its current low interest rate, easy-money policies, tanking financial markets, and triggering a recession.[x] In the seventies, after inflation spiked, only higher interest rates and recession brought it under control.
Hopefully, sounder economic policies will prevail. No one should want to see the beginning of a new retail category in 2024, the “Five Dollar Store.”
[ii] https://www.bea.gov/news/2021/personal-income-and-outlays-august-2021; https://www.washingtonexaminer.com/news/fed-inflation-rockets-30-year-high
[v] https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/07/19/remarks-by-president-biden-on-the-economy-3/; https://www.foxnews.com/politics/inflation-benefits-hurting-economy-poll