On the menu today: This is one of those mornings when, by the time I’ve finished writing the Jolt, I’m irked and irritated, because there’s mounting evidence that we’re still in the middle of a long, difficult bout with inflation, not almost done with it. Meanwhile, our president thinks he isn’t getting enough credit because in the past few months, “Inflation hasn’t spiked. It has just barely — it’s been basically even.” Stuck around the worst inflation rate in 40 years is a terrible place to be, and this president is indignant that people aren’t being more appreciative of the amazing job he’s doing.
Pouring Gasoline on the Inflationary Fire
There’s a good reason to be worried about inflation.
The Consumer Price Index measures how today’s prices compare to the prices twelve months ago. If you see 2 percent inflation as normal or stable as the Federal Reserve does, then when the CPI number gets well beyond 2 percent, that’s when we worry. If you look at the month-by-month numbers, the Biden presidency started with normal numbers, then jumped to 4.2 percent in April 2021, and then 5 percent in May. With the country emerging from Covid and people getting out and spending more, and also struggling with a shortage of goods because of supply-chain issues, maybe we shouldn’t have been that surprised to see demand getting higher, supplies getting lower, and prices rising.
But it didn’t turn out to be a short-lived issue of product shortages or pent-up demand. The CPI rate remained between 5 and 5.4 percent from May to September of 2021 — and it was in July 2021 when Biden declared that:
“There’s nobody suggesting there’s unchecked inflation on the way — no serious economist.” In other words, by July, people were already starting to notice that inflation was getting high and that it hadn’t been a one or two-month blip.
When we look at the CPI numbers for August 2022 — 8.3 percent — that figure is telling us the increase in prices compared to the numbers of August 2021, which had already taken an inflationary jump of 5.3 percent compared to August 2020. With each passing month since March, we’ve seen 8 percent to 9.1 percent inflation, and that’s on top of the higher prices we were starting to pay last summer and fall! After last year’s prices took a significant jump, this year’s price increases should look smaller by comparison. But they don’t! Instead, they look bigger, indicating that inflationary pressures are getting worse, not better.
This week, Ford Motor Company announced lower-than-expected earnings, and warned of “inflation-related supplier costs that will run about $1 billion higher than originally expected.”
Today, the Federal Reserve is expected to raise interest rates again, this time by three-quarters of a percentage point; some people who understand rates and markets much better than I do contend that the Fed’s current approach is like ripping off a Band-Aid really slowly.
I’ll let the professional economists hash that out, but I’ll note that the Fed is trying to reduce the amount of money sloshing around in the economy, while the federal government and certain state governments are trying to throw even more money into the economy. If the Fed isn’t seeing the results it wanted to see by now, maybe it’s because the White House and Congress are rowing their oars in the wrong direction?
Even Vox conceded that the American Recovery Act — proposed by the Biden administration and passed entirely by Democrats — exacerbated inflation; this is about as close as you’re ever going to find to a “mea culpa” over there:
It’s true that the American Rescue Plan wasn’t the primary cause of today’s inflation. But if inflation was always going to be a problem, then it’s important to avoid policies that could make it a much worse problem.
In retrospect, it seems that Democrats simply didn’t take this seriously enough back in early 2021. They wrongly concluded that a stimulus far in excess of what models said was necessary was the less risky option. They thought they were still in the “money printer go brrr” era, where there was less pressure to be judicious about where that money was going — so instead of targeting help to those who needed it, they sent hundreds of billions of dollars to well-off Americans and states doing just fine, for political reasons.
Back in March, economists at the Federal Reserve analyzed the numbers and concluded that, “Among other reasons, the sizable fiscal support measures aimed at counteracting the economic collapse due to the COVID-19 pandemic could explain about 3 percentage points of the recent rise in inflation.”
Now throw in the $1.2 trillion in new spending of the infrastructure bill — “More than $850 billion in funding from the Infrastructure Investment and Jobs Act is currently making its way to state and local governments” — and the massive spending contained within the so-called “Inflation Reduction Act,” which the Penn-Wharton budget model concluded would have “no meaningful effect on inflation in the near term.” The roughly $1 trillion or so in student-loan forgiveness will also make certain recipients feel like they’ve been given $10,000, which will make them spend more.
But wait, there’s more! Next month, the state of California will send checks ranging between $200 to $1,050 as “inflation relief payments” to everyone making less than $250,000 and to joint filers who make more than $500,000 annually.
In other words, to fight inflation, which is too much money chasing too few goods, the state of California is giving everyone more money.
But the other nagging reason for worry stems from what we can discern from Biden’s comments on 60 Minutes this past Sunday:
SCOTT PELLEY: Mr. President, as you know, last Tuesday the annual inflation rate came in at 8.3 percent. The stock market nosedived. People are shocked by their grocery bills. What can you do better and faster?
BIDEN: Well, first of all, let’s put this in perspective. Inflation rate month to month was just — just an inch, hardly at all–
PELLEY: You’re not arguing that 8.3 percent is good news?
BIDEN: No, I’m not saying it is good news. But it was 8.2 percent or — 8.2 percent before. I mean, it’s not — you’re ac — we act — make it sound like all of a sudden, “My God, it went to 8.2 percent.” It’s been—
PELLEY: It’s the highest inflation rate, Mr. President in 40 years.
BIDEN: I got that. But guess what we are. We’re in a position where, for the last several months, it hasn’t spiked. It has just barely — it’s been basically even. And in the meantime, we created all these jobs and — and prices — have — have gone up, but they’ve come down for energy. The fact is that we’ve created 10 million new jobs.
Let’s put aside the usual criticism of Biden. If you’re Biden and his team, you must know that Pelley is going to ask about inflation, and you had better have a good answer. One might expect the president to say something like, “My team and I know inflation is still too darn high, and Americans are feeling it. That’s why we’re doing X, Y, and Z.”
Instead, Biden’s response was, “For the last several months, it hasn’t spiked. It has just barely — it’s been basically even” — in other words, it’s not that bad. But it is that bad! Biden’s other maneuver is to point to the low unemployment rate. But Americans are understandably unimpressed with low unemployment when they’re living with month after month of the highest inflation in four decades.
In Biden’s mind, inflation is almost completely fixed; people like Pelley are being unreasonable by bringing it up as a problem, “making it sound like all of a sudden, my God, it went to 8.2 percent.” Biden’s answer suggests that he thinks the Fed has got this problem licked. And a president can’t solve a problem he can’t see — or perhaps it is more accurate to say he won’t see it.
As for Biden’s contention that prices have “come down for energy,” he presumably means gas prices . . . except, according to AAA, gas prices just stopped declining; yesterday the national average increased by a penny, from $3.67 to $3.68 — and by historical averages, that’s still really high!
Back in November 2021, Biden expressed surprise at how high gas prices were getting: “Did you ever think you’d be paying this much for a gallon of gas? In some parts of California, they’re paying $4.50 a gallon!” This morning, the average price of a gallon of gas in California is $5.49. Biden continues to spike the football at the slightest bit of good news, ignoring the bigger picture.
And even if gas prices are down, we’re shifting from summer driving season to winter heating season — and that’s going to be brutal:
Americans are in store for an expensive winter when it comes to paying their heating and electric bills.
The average household will pay about 17 percent more this winter to heat their property, reaching a 10-year high of about $1,200 per home, according to a forecast from the nonprofit National Energy Assistance Directors Association. Electric bills are also set to rise, with the U.S. residential price of electricity expected to jump about 7.5 percent from 2021, according to the U.S. Energy Information Administration.
And yet Biden is on national television, insisting that prices “have come down for energy.”
(Our Dominic Pino notes that Biden’s entire characterization of the economy is an alternate universe: “Inflation cannot continue to decline when, by the president’s own characterization, it is ‘basically even.’ And the economy cannot continue to grow when it has, in fact, been shrinking for two consecutive quarters. Whether that counts as a recession is debatable, but whether negative numbers count as growth is not.”)
I listen to sports radio, and right now, they’re running a promo for the Tony Kornheiser Show that goes something like this — “I was in a fast-food joint, and I hadn’t been in one in a while. I get a burger, fries, and drink, and the guy behind the counter tells me, $13.72. I was like ‘13-72? What is that, my order number?’”
ADDENDUM: You’re going to want to read Dan McLaughlin’s piece on pollster Robert Cahaly of Trafalgar and why his surveys show Republicans competitive even in some of the bluest places. Trafalgar’s record is solid enough — the firm has an A- rating from FiveThirtyEight — that Cahaly can’t be dismissed:
The most recent Trafalgar polls released between August 31 and September 18 show Kari Lake winning by 4 points in Arizona, with Blake Masters down by just 2; Dr. Oz and Doug Mastriano each down 2 points in Pennsylvania; Lee Zeldin down 5 in the New York governor’s race; Tiffany Smiley down 3 in the Washington Senate race; Brian Kemp up 7 and Herschel Walker up 1 in Georgia; Ted Budd up 3 in North Carolina; Gerald Malloy down 7 in the Vermont Senate race, with governor Phil Scott up by 53; and Republicans up 6 in the generic ballot. . . .
As Cahaly told me, the most common question he gets from poll respondents is, “How long will this take?” Ordinary, average Americans may be willing to answer a seven-question survey while they’re making dinner for the kids or between innings of the ballgame, but the longer a survey is, the more the sample will be dominated by people who are highly politically engaged, highly educated, extremely online, or just lonely and happy to talk to a stranger on the phone. Cahaly scoffed at seeing polls reporting that half or more of the sample has a college degree, when no statewide electorate in the country will look like that.