April 12, 2022
Center for American Prosperity
The Biden Price Hike Continues its Assault on Americans’ Wallets
April 12, 2022
- Newly released inflation data reveals that the consumer price index (CPI) rose by 8.5% year-over-year in March, breaking 40-year-old records to the detriment of Americans’ finances.
- Inflation continues to be broad-based in the damage it is inflicting on the economy, with energy prices exhibiting a particularly steep increase last month. The average price of gasoline has gone up by 74% since the Biden Administration took office in January 2021.
- Wages are not rising fast enough to offset inflation. The average worker has seen their paycheck shrink by 2.8% in purchasing power over the past year and has paid almost a $1,200 inflation tax since this inflationary episode began, with low-income families and seniors most vulnerable.
- The Biden Administration has been deflecting blame from their reckless policies onto “corporate greed” and Vladimir Putin despite clear evidence that inflation did not spike until the American Rescue Plan Act was passed in spring 2021 and predated Russia’s incursion into Ukraine.
- Small businesses continue to confront even higher inflation — 10% according to producer price index (PPI) data from February 2022 — suggesting that consumers may be in store for continued high inflation and further undermining the Biden Administration’s false corporate greed narrative.
- The prospects for inflation become even worse if the Biden Administration pushes forward with implementing policies from its living dead Build Back Better agenda — or Big Government Socialism Bill — that would impair the supply-side of the economy at precisely the wrong time, given rising recession risks.
Inflation is America’s top economic concern, and the latest data confirms that they are right to be worried. With each passing month, inflation continues to climb, and the latest 8.5% year-over-year increase for the consumer price index (CPI) has yet again broken 40-year-old records. It is important to remember that the last time inflation was this high, it was on its way back down, not still on the ascent with no relief in sight.
Workers’ paychecks are feeling the pinch. Although wages are on the rise, the pace of wage increases continues to fall below that of inflation. As a result, the average worker has seen their purchasing power fall by 2.8% over the past year, causing them to pay a nearly $1,200 inflation tax since the beginning of this inflationary episode in 2021. Low-income workers and seniors living on fixed incomes are even more vulnerable to this surge of inflation — and unlike in the late 1970s and early 1980s, when seniors were at least able to earn a high-interest rate on their savings, the return on deposits over the past year has remained rock bottom. Even though Americans pay the inflation tax at the cash register each time they make a purchase rather than by filing IRS forms, its effects are just as real as any other tax. The Biden Administration has already broken its pledge to shield people earning less than $400,000 from tax hikes.
After months of downplaying inflation in 2021, the Biden Administration finally recognizes that it can no longer ignore Americans’ most pressing economic worry. However, rather than admitting the failures of its reckless, short-sighted fiscal and energy policies and rolling up its sleeves to implement long-overdue supply-side reforms, the Biden Administration considers the current inflation primarily as a political and messaging problem to be obfuscated.
The first prong of the Biden Administration’s gaslighting campaign involves attributing the inflation surge to a sudden, inexplicable emergence of “corporate greed” that coincidentally reared its head only after the Biden Administration passed its multi-trillion dollar, deficit-financed, anti-work American Rescue Plan Act in spring 2021. Left unsaid is why companies must have decided to wait to pursue profits until after the stimulus bill passed or why competitive market forces suddenly evaporated upon implementation of the Biden Administration’s fiscal policies, or why inflation in the U.S. is higher on average than that in other developed nations. Perhaps a more appropriate explanation can be found in the words of Larry Summers — former Clinton Administration Treasury Secretary and Obama Administration Director of the National Economic Council—when he proclaimed that “…this is the least responsible macroeconomic policy we’ve had in the last 40 years.”
The America First Policy Institute has written previously about the flawed logic of this scapegoating, and Michael Faulkender — former Assistant Secretary for Economic Policy at the Treasury Department under President Donald J. Trump —recently testified in front of the U.S. Senate on the flaws of this argument, among which is the fact that producer prices have risen faster than consumer prices. According to the latest data from February 2022, the producer price index (PPI) has risen 10% year-over-year — even higher than the 8.5% consumer inflation. Thus, if anything, companies are not passing along the full brunt of their cost increases to consumers, which counters the Biden Administration’s narrative of marauding price gougers. In fact, even the Biden Administration’s own White House Council of Economic Advisers has expressed internal skepticism of the political line taken by the more overtly political units in the West Wing. Bernie Sanders, however, is buying the spin and has offered his own remedy: a 95% tax on “windfall profits” that would serve mostly to discourage investment and further fuel supply shortages and price hikes.
More recently, the Biden Administration has trotted out the second prong of its diversionary narrative, labeling inflation as the “Putin price hike.” They are right about one thing: Vladimir Putin’s brazen war on Ukraine — enabled by the current administration’s foreign policy weakness—has further contributed to rising energy prices. However, oil prices had already risen by 63% from January 2021 to mid-February 2022 before Putin began his invasion. Here, too, the Biden Administration’s false narrative does not hold up under scrutiny.
Unfortunately, even if the Biden Administration manages to deflect attention to these two bogeymen of inflation — corporate greed and Putin — one inherent flaw to a messaging-only approach to the current inflation crisis is that it does nothing actually to solve the problem and provide relief to American families. Even more foreboding is that the Biden Administration has plans far worse than just a “do nothing” approach to inflation. Instead, it appears intent on resuscitating the policies from its zombie Build Back Better bill, otherwise known as the Big Government Socialism Bill, that would seek to permanently transform the U.S. economy into one where peoples’ livelihoods come from government checks instead of paychecks and where America’s energy security gets sacrificed on the altar of climate activism. These dangerous prescriptions, along with Bernie Sanders’ proposed windfall tax, would discourage investment and the supply of labor and energy, thereby adding to inflationary pressures and putting the U.S. economy in an even more precarious position at a time when some forecasters are already suggesting rising chances of a recession. The American public simply cannot afford the Biden and Bernie price hikes.