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OPINION:
Inflation hit 8.2% in September from one year prior. Core inflation — an important reading of prices on goods because it excludes volatile food and energy prices — accelerated to a 40-year high. Consumers are now spending 13% more on groceries. Meanwhile, real wages fell even more sharply last month, marking another month of effective pay cuts for the American worker.
While Americans made tough decisions on how to stretch their budget at the supermarket over the weekend, President Biden dismissed the real concerns about inflation with one bite of his ice cream cone. It must be good to be a Washington elite.
While munching on ice cream at a Baskin Robbins in Portland, Oregon, Mr. Biden said he’s not concerned about the strength of the U.S. dollar or economy. In his words, the internals of the economy are “strong as hell.” Inflation? It’s “worldwide.”
Mr. Biden is concerned about the rest of the world — “lack of economic growth and sound policy” — as well as inflation in other countries.
The president should save his concern for the people he’s supposed to be responsible for. The U.S. is lagging in growth. Our two most recent quarters witnessed negative growth. We lack a sound fiscal policy, which is partly to blame for the inflation levels not seen since before the millennial reporters in the White House press pool were even born.
Such a nonchalant view of the U.S. economy exposes how out of touch Mr. Biden is with the realities of everyday Americans. It’s a slap in the face to many people such as the Baskin Robbins employee behind him who effectively received a 3.8% pay cut due to inflation.
The president’s reasoning is a bit puzzling as well. A strong dollar can work both in our favor and against it. We can buy more foreign currency, and Americans traveling abroad get more for their buck — unlike back here at home. Yet dollars invested in multinational companies don’t go as far. Foreign goods become cheaper, but demand for U.S. goods is depressed.
Most notably, a strong dollar can be a driver of global inflation — which concerns Mr. Biden. As John Lynch, chief investment officer at Comerica Wealth Management, explained, “Dollar strength equates to global currency weakness, fanning inflationary pressures around the world.”
It’s fine for Mr. Biden to personally be concerned about our allies (and adversaries) battling high inflation made worse by a strong U.S. dollar. However, the mom in Scranton, Pennsylvania, who saw egg prices skyrocket 31% from a year ago would probably respond, “‘Come on, man!’ What about my family? What about Americans?”
Blaming U.S. inflation on global inflation is an inadequate White House talking point. Today, inflation is a global phenomenon, but one year ago, accelerating prices were largely isolated to the U.S. Let’s rewind the tape to see what’s really driving this problem.
Economists at the Federal Reserve Bank of San Francisco wrote earlier this year that inflation rates in the U.S. tracked closely with those in other OECD (Organisation for Economic Co-operation and Development) countries throughout most of the pandemic but, by early 2021, increasingly diverged. “U.S. core CPI grew from below 2% to above 4% and stayed elevated throughout 2021. In contrast, our OECD sample average increased at a more gradual rate from around 1% to 2.5% by the end of 2021.” The cause: “unprecedented” fiscal and monetary policies introduced, I would add, especially in 2021 (i.e., the American Rescue Plan).
The elites in power conveniently omit the context of what drove America’s exceptional inflation to discourage Americans from connecting the dots between the flurry of fiscal spending and rising prices. The Biden-signed stimulus checks, boosted unemployment benefits, expanded monthly child tax credit payments, and student loan and rent moratoriums at a time when the economy was reopening, were ill-advised but politically convenient. Congress should have been winding down spending and the Federal Reserve tightening its monetary policy belt. Even those on their team warned of the inflation risk.
Other nations have caught up to our 40-year-high core inflation rates whether because of our strong dollar or their weak economies and policies. It’s a concern for those nations, but our leaders in Washington should at least feign some concern for the unrelenting pressure on American households that are just trying to make ends meet.
Every month that inflation remains four times as high as it was at the start of 2021 is another month that reckless federal policies rob Americans of their quality of life. Unlike Mr. Biden, they don’t have the luxury of licking an ice cream cone and walking off.
• Patrice Onwuka is director of the Center for Economic Opportunity at Independent Women’s Forum and a Tony Blankley Fellow at the Steamboat Institute.
