President Joe Biden claimed in his State of the Union address that "inflation is coming down. ... Food inflation is coming down. Inflation has fallen every month for the last six months while take-home pay has gone up."
This is all misleading, and new inflation data for January explain why.
Inflation is still high and barely moving downward as of
last month, when it was 6.5% annualized. Even that statement understates the
problem. For the inflation rate is not like the unemployment rate. Just because
it goes down doesn't mean prices are coming back down and that your groceries
are getting more affordable. Rather, it only means prices are rising slower
than before, but they are still rising.
Inflation is cumulative. So January's inflation rate of 6.4%
means prices are still rising at a ruinous rate, almost certainly faster than
your pay even though by less than the 9% rate that horrified shoppers last
summer.
Specific household expenses reveal inflation that is even
worse than the headline number suggests. Groceries in January cost 11.3% more
than a year ago. Electricity is up nearly 12%, and natural gas 27%. Airfares
are up almost 26%. Rents are up almost 9%. The picture is grim despite
continued low unemployment — which may anyway not last if interest rates are
cranked up further to fight persistent inflation.
Whether a "soft landing" is possible, every day
brings a new reminder of how ridiculously wrong the White House was in its
insistence that inflation was merely "transitory" in 2021. Biden's
stubborn insistence on more stimulus spending despite the massive amounts
shoveled by former President Donald Trump created exactly the difficulties
people predicted at the time. Low production due to COVID-19, plus more
borrowed government money in circulation, is the textbook recipe for inflation.
And we're now in it up to our ears.
To defeat inflation, politicians need to do what they can do
with fiscal policy. The first thing is to stop hosing fuel onto the fire. They
need to do something drastic that Congress never does, which is to cut
spending. Obviously, Biden's big spending plans outlined in his State of the
Union address should be set aside for the general good.
Biden won't do that, of course, if the common good is the
only incentive. Someone must explain to him that such a move would also work
for his immediate political benefit. Continued inflation and double-digit
mortgage rates could well become the last nail in the coffin of his presidency.
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