Did you realize that inflation was “functionally over”?
Saith the experts.
[Hat tip: Althouse.]
From Zachary D. Carter at Slate:
Something is wrecking Joe Biden, but it isn’t the economy—at least the economy that economists know how to measure—and it isn’t inflation.
There’s a lot in that sentence. Does it assume that only one thing is the problem for Joe? Does it assume it’s a hard-to-perceive mystery? Does it assume that what economists measure is all there is to know about how a voter perceives the economy and how it affects him or her? Does it assume that economists’ measurements are unbiased?
And how do economists measure inflation? We get a hint in the next paragraph [emphasis mine]:
None of this has prevented Biden’s critics from declaring him an economic failure. They have instead shifted the goalposts. The warning cry of the early Biden years was “stagflation“—the simultaneous deluge of high unemployment and high inflation that defined the 1970s. … But that corner seemed to slip farther and farther away as unemployment remained stubbornly low and economic growth stubbornly high, so negative commentary began to focus exclusively on inflation. This remained a popular approach until inflation, for all intents and purposes, disappeared. According to the Federal Reserve’s preferred measure, prices rose just 2.7 percent between April of 2023 and April of 2024. Two-point-seven is higher than zero, but price changes at this pace are simply not perceptible to anyone except economists.
That paragraph emphasizes the idea that whatever criticism there is of the economy under Biden is some sort of artifact created by his critics, rather than a reality that people perceive all by themselves. It ignores the fact that unemployment figures are not necessarily a measure of actual unemployment (see this, for example, which although written in 2022 explains the principle). But even more importantly, I think, is the odd fact that it doesn’t credit the consumer for being able to think longer than the last year when evaluating inflation.
When I go to the grocery store and my grocery bill seems to be at least 30% higher than it was in 2020, I don’t get the warm fuzzies and tell myself that at least it hasn’t risen in the last year, or at least not all that much – although I beg to differ with the author of that piece, because 2.7% is perceptible to those on a tight budget.
But the last year isn’t the point. If what I used to pay for a bag of groceries during the Trump administration was pretty stable at $65, let’s say, and that same bag costs me a bit more than $100 now, I sure do notice. As for the 2.7% increase, in the last year, not only is it on top of the earlier bigger jumps, but 2.7% of $100 every week adds up to about $10.80 per month or about $130 a year. That’s not nothing to those who live paycheck to paycheck.
And people with families pay much more than $100 a week on groceries. This article from a year ago estimates the typical family of four should spend between $975 a month (if being very “thrifty”) to $1580 (if being economically “liberal”), with two levels in between. At a 2.7% rise for the year, that comes out to about $315 more per year even for the most “thrifty” among us. For people on a tight budget, that’s quite noticeable, and of course it’s on top of much higher rises – the same article mentions an 11.9% rise from 2021 to 2022.
There’s also this recent article:
In a recent interview, President Biden was told that food prices are up over 30% on his watch. But he casually dismissed this fact, claiming people have money to pay those elevated prices. …
According to the Bureau of Labor Statistics, average weekly paychecks have increased about $150 under Mr. Biden, or 14.1% in roughly three years. Normally, that would be cause for celebration, but not in the inflationary environment of “Bidenomics.”
Because prices have risen an average of 19.3% during Mr. Biden’s tenure, the average real, or inflation-adjusted, weekly paycheck has shrunk by about $50, or 4.4%. Today’s larger paychecks buy less, and consumers are being squeezed by higher prices everywhere.
This drop in purchasing power has many families relying on credit cards to make ends meet, pushing outstanding balances up to $1.1 trillion, even while the interest rate on that debt is at a record high.
Some of us haven’t gotten raises, either. Some of us are on fixed incomes, or are unemployed (for the latter, more than the statistics show).
Not only that, but grocery shopping is something we all do on a regular basis. We know how much our groceries used to cost on average. We know how much the prices have risen. And groceries are, of course, only one type of expense, although a very in-your-face one.
But back to the original article by Zachary Carter. This paragraph is unintentionally humorous:
With inflation functionally over, the search has now shifted to some other kind of price metric that can explain Biden’s terrible polling. The Washington Post editorial board hypothesizes that the country is experiencing “an inflation hangover,” feeling squeamish about higher price levels even though prices are no longer increasing at a meaningful rate.
Got it? Inflation is functionally over, meaning the thing that economists measure isn’t very high any more. But people at the checkout counter aren’t measuring the thing that economists measure, at least not in the timeframe that the economists measure it. We ask ourselves the old question “are you better off now or four years ago?” And in real life, which is where most of us live, “higher price levels” are indeed more important that the current rate of increase. Not only that, but what an economist considers a “meaningful rate” may not be the same as what the poor shmo in the grocery store, wondering whether to buy a piece of meat, considers a meaningful rate.
The writer goes on and on about various metrics, but still seems very puzzled as to why Biden is polling so badly. Now, to a hammer everything looks like a nail, and Zachary Carter seems to be an economics writer, but are Biden’s bad numbers in the polls really such a mystery? I think it’s more of a mystery why he’s still doing relatively well, but I chalk that up to Trump Derangement Syndrome on the part of so many voters.
It’s “Biden”.
Ergo, it’s a lie (of commission or omission…or both) / a misrepresentation / a cover up of some kind / a half-truth.
What it CAN’T BE is the TRUTH.
By definition.
What it CAN’T BE is REAL.
It’s “Biden”.
Related (starting from the most credible and on down…well, you get the idea).
https://babylonbee.com/news/white-house-claims-your-inability-to-afford-groceries-is-misinformation/
https://www.grumpy-economist.com/p/inflation-confusion
https://www.zerohedge.com/economics/one-career-economist-exposes-lies-modern-economics
https://www.zerohedge.com/personal-finance/middle-class-destruction-real-story-behind-americas-declining-economy
https://www.foxnews.com/opinion/economy-tank-banks-reeling-inflation-sky-high-biden-telling
https://www.zerohedge.com/economics/gdp-vs-gdi-why-huge-discrepancy-and-which-better-measure-economyttps://reason.com/2023/03/14/inflation-isnt-going-away/
https://www.zerohedge.com/economics/us-fiscal-nightmare-yellen-cant-expect-strong-ecoonomy-higher-spending-taxes
https://www.zerohedge.com/economics/us-producer-prices-accelerating-fastest-rate-12-months
https://www.zerohedge.com/economics/elon-musk-warns-over-bidens-massive-deficit-spending
https://www.zerohedge.com/markets/are-we-destroying-economy-purpose
https://www.zerohedge.com/markets/how-bidenomics-generates-more-debt-and-inflation
Etc….
File under: Paging Paul Krugman…
Powerline linked to an article the other day that quoted Neel Kashkari the chairman of the Minneapolis Fed that talked about him meeting with some people about how inflation is worse than a recession in many ways. Mainly because inflation affects everybody but a recession doesn’t usually affect everyone.
I can’t find the article at the moment but it was really good and might be worth adding on to your article.
Correction:
https://www.zerohedge.com/economics/gdp-vs-gdi-why-huge-discrepancy-and-which-better-measure-economy
https://reason.com/2023/03/14/inflation-isnt-going-away/ (from a year ago).
Hmmm. The original comment seems to have been ipmrisoned in an alternate universe…
Orwell is not supposed to be a how to manual
Barry Meislin:
I managed to get your original comment out of hibernation. I think it got stuck because of too many links.
Oh boy. I recall very recent financial news talking about a 2.9% inflation rate. A CNN article I just pulled up says 3.0%… and it says it was 4.0% one month ago. Talk about moving goal posts. Are we talking about overall CPI or core CPI, or PCE numbers?? Sheesh.
Of course, neo nails the fundamental point. It’s the 30+% overall increase accumulated over the last couple or few years that really matters. Or the doubling of gasoline prices that began not long after Joe hamstrung the US energy industry with his “On day one…” executive orders.
The CNN article.
https://www.cnn.com/2023/07/12/economy/cpi-inflation-june/index.html
Who are they fooling here, you cant fake this?
I only by meat on sale. In 2020, 1 lb package of 80% hamburger was $1.99. Today in 2024, the same store has the same 1 lb package of 80% hamburger on sale for $4.99. I was able to get and freeze some before at $3.99 but only 2 left.
In 2020, pork steak was $1.49 per pound. Today in 2024, the same store has pork steak on sale for $2.99 per pound.
Inflation only looks at regular prices, not the sale prices.
Given that the double-digit inflation of the Carter administration is four decades in the rear-view mirror, the argument that “inflation isn’t that high” seems pretty weak, unless you want to imply that falling prices are just around the corner. That may be true, but I’m betting that this is more of a carrot dangled in front of the voters to keep Biden’s approval numbers from slipping further.
“According to the Federal Reserve’s preferred measure, prices rose just 2.7 percent between April of 2023 and April of 2024” There is nothing magic about that one-year measurement interval. If you’re trying to perceive long-term trends, you generally want a longer-term look to average out random fluctuations.
What people are perceiving, and accurately so, I believe, is that government policy is such that there will be persistent and significant inflation basically forever, except for periods of recession and unemployment.
I think neo is describing the problem accurately but a lot of right-leaning media is not.
We had sub 3-ish percent inflation for 35 years and didn’t care. In that time prices rose about 2.4-fold. But so did our incomes. 3-ish percent inflation is not the problem.
The 2021-2023 inflation was too fast for our incomes to adjust, and that’s why there’s suffering. It’s not the price level, it’s that prices haven’t risen on both sides of the equation of income and expenditure.
The prices are probably never coming back down. When Reagan “ended inflation” in the 1980s prices never went back down, they kept climbing up, almost every year. And we mostly didn’t even notice. And when Reagan ended inflation he got an economic boom around the same time–I’m not sure of the cause-effect relationship–and so there was nothing for people to blame him about, they didn’t care that the price level never went back down.
Is there some way that elites can prevent incomes from going up in tandem to offset the higher prices? Well, letting people flood across the border is a good start.
One thing that is not well-understood is the interaction between inflation and capital gains taxes. If you hold an investment for say 10 years–while the inflation effect is a total of 30% and the value of your investment increases by 50%…then you are paying taxes on those inflationary increases, as well as on the real increase.
There are actually scenarios in which you can be required to pay ‘capital gains’ taxes, even though in real terms you lost money.
I never cease to be amazed at the mental gymnastics Biden supporters perform in order to excuse his poor performance. I imagine them to be akin to some fo the passengers in one of the Titanic’s lifeboats excusing the captain for hitting the iceberg, because akshually, there was no iceberg, so it could not possibly be the captains fault for hitting it. Must be something else. Something. Anything. Look! A squirel!
Let them announce what they will. They’re giving people a choice; believe them or believe their ‘lying’ wallets.
They could qualify for the olympics
What exactly is the point of articles like Carter’s (and I’ve seen many in a similar vein, of late)? And who is the intended audience?
My assumption is the intended audience is affluent liberals/progressives who feel a twinge of guilt/worry about the fact that Brandon is in the toilet on economic matters. And the point certainly not to offer any solution to the above or to lay any blame on Brandon and his administration. Rather it is to provide succor for these anxious souls, and stoke their already massive sense of superiority.
“Biden has saved the economy! This is a brilliant, compassionate administration, as are all of its supporters. But too many deplorables are just too damn stupid to realize it!”
It’s not a wise campaign strategy but man, it makes the Democrat base feel good.
Ive long since called them pebble
Biden did the same thing Obama did. He flooded the economy with money. Obama’s monetary policies didn’t cause inflation because the mortgage crisis of 2007 had plunged the nation into deflation.
Obama’s years were filled with zero interest rates and heavy spending coupled with a lot of regulation. We had no inflation because supply and demand were pretty much in balance, and unemployment rates ranged from 5 – 9%, which also decrease inflationary effects.
Biden’s big spending, reducing the supply of energy in the name of fighting AGW, and the reduction in supply due to the lingering effects of Covid supply chain malfunctions were guaranteed to cause inflation.
Jobless numbers are mysterious since Covid. Though many people have returned to work, many businesses are finding it hard to find employees. Though job growth seems to have been relatively strong, a large number of new jobs have been in government, which adds to inflation because they add no new production to the economy – only more money.
I am mystified by what I see locally.
People seem to be spending and seem to have a lot of money. The economy here is primarily based on Boeing and its suppliers/sub-contractors. I see people hauling lots of non-perishables out fo the local Costco and wonder if they are trying to buy now to beat the coming price increases or if they just have big families. Anyway, I see no indicators of people being cautious with their spending.
I lived through the Carter inflation years but had an upwardly mobile job. We suffered, but eventually my pay grew enough to get us ahead of the curve. Right now, a large number of baby boomers are retired or retiring. Most will be living off their savings and some pensions. Inflation is a nasty thing for retirees. I’ve been retired 33 years now and it’s been a job trying to maintain our standard of living on a fixed pension coupled with Social Security and investments.
Groceries are the most obvious measures m of how prices have gone up. But look at property taxes, homeowners’ insurance, auto insurance, gasoline prices, cable/internet/phoner bills, gas/electric bills, landscape maintenance costs, etc., etc. – all pretty much unavoidable.
Biden and his advisers have no idea of what to do. It’s just not in their DNA to cut government spending, drill, baby, drill, and reduce regulations. Can’t do that. Someone might get rich.
Zachary carter is a biographer of keynes in resident at the carnegie endowment
Niketas Choniates:
The 2021-2023 inflation was too fast for our incomes to adjust, and that’s why there’s suffering. It’s not the price level, it’s that prices haven’t risen on both sides of the equation of income and expenditure.
Two comments:
1. Inflation outstrips wages more easily than wages can outpace inflation because inflation is primarily caused by governments printing money.
2. While wages can keep pace with inflation, this disguises the erosion of the dollar’s value. We pay more, for example, for a gallon of milk because dollars are worth less, not because milk has become a superfood on a par with Popeye’s spinach.
The inflation was mild in this country but it touched off the arab spring in the 10s
The question is, why isn’t inflation higher given the amount of deficit spending since COVID?
Why has the dollar remained strong? We are the best of an ailing global economy? Is this contributing?
Has record levels of personal debt contributed? Is the government spending masking the recession most thought was coming? I know that’s credited to the rise in interest rates which also affects disposable income.
How much has draining the strategic petroleum reserves brought inflation down? Biden sold nearly half of the reserve, bringing it to the lowest levels since the 1980’s.
The economy seems to be defying the data. Maybe it’s the data. I know we’ve changed some of the ways inflation is measured.
The Biden administration is touting the low unemployment, but if you look at the labor participation rate is below the Trump years and nothing like historical average over the last 50 years.
Measuring inflation is very difficult, even for those with high professional standards and the best intentions. How do you adjust for the fact that car in 2024 is very different from a car in 2010? How do you factor in grocery prices at Costco versus Walmart versus Safeway, given that one of them required a membership fee, one of them is further away and takes more time to park and walk around, and one of them is closer?
What about housing prices?…how should mortgage interest rates be factored in?
Very difficult work.
Eph that crap. We have high single digit, if not double-digit, inflation. We have high single-digit, if not double-digit, unemployment.
That the government is using statistical tricks to lie to us is not in question, any more than Clinton’s little budget trick to “balance the budget” by “paying off the deficit using a credit card”, in essence, was valid.
They’re lying assholes, and anyone who isn’t a total partisan hack knows this, just from going to the supermarket.
There’s a meme floating around about the purchases made by Kevin, in Home Alone, at the supermarket.
They were supposedly about $12 bucks in 1990. They were about $44 bucks last year. They are $77 this year. And the year ain’t over yet…
I haven’t verified the meme, but it sounds about right.
Two metrics have changed over the years, including housing inflation and changing from a more expensive to cheaper product.
As the article states, this has lowered the inflation number by several % points. So instead of 7%– using more historical methods the inflation would be about 11%.
Why Has the Inflation Calculation Changed Over Time?
https://www.nytimes.com/2022/05/24/technology/inflation-measure-cpi-accuracy.html
Correction: I’ve been retired 31 years. It’s been a long time. And I’m not complaining about that. 🙂
“Biden and his advisers have no idea of what to do…”
I’d have to take issue with that sentiment.
(Kinda like sayin’ “Muhammad Atta and his pals had no idea of how to land a plane…”)
Would be more accurate to say, “Biden and his advisers have no idea of how to effectively perfume their meticulously—and lovingly—cultivated mega-inflationary pig…” (with profuse apologies to pigs…).
…IOW how to effectively COVER UP that their Neo-Marxist Nirvana is actually Hell on Earth (or getting there “gradually then suddenly”…)
File under: Why can’t those darn rubes understand the paradise we’re creating for ‘em???
Bar in exceptional circumstances (1931-47, 2008-12) inflation in excess of 2% per year is too much.
Brian E mentions housing inflation, which has a huge impact on everyone, but especially on young families. And housing inflation leads directly to rental inflation, which is also enormous.
The measurement of inflation has been changed to minimize it, plus games are played with it. Shadowstats has the original Calculations and shows just under 8%, vs the official 4%.
https://www.shadowstats.com/alternate_data/inflation-charts
Plus the Biden Administration is doing everything in its power to keep the price of gas down before the election.
“Brian E mentions housing inflation, which has a huge impact on everyone, but especially on young families.” – J
Yes. During the Carter years owning a home was a hedge against inflation. It’s the same today. However, the demand for homes has outstripped the supply. Two main reasons.
1. No one is selling who has a low interest rate mortgage. Selling and exchanging a 3% mortgage rate for a 6-7% mortgage rate is a losing proposition unless you’re sure you can re-fiancé at a much lower rate very soon.
2. Here in Washington state, we have a “Growth Management Act.” This legislation was passed in the 1990s. The purpose was to force people to build on smaller lots closer to urban centers, and force people out of their cars. It has not forced people out of their cars, 🙂 but it has forced the costs of building homes up considerably. 🙁
Twenty-five years ago, it took about a month and maybe $300 dollars to get the permits to build a new home. Today, that runs two years and $25,000. So, it appears that developers here are not producing enough new homes to meet the demand.
When interest rates come down, no one knows what’s going to happen, but realtors are expecting a lot more inventory. Whether that will result in prices moderating, is any one’s guess. For first time home buyers it would help their situation. With lower interest rates they could qualify for a higher price than the can with the present rates.
Home ownership is the bulwark of the American dream. Somehow, we need to keep it available to young families.
My understanding is that the inflation numbers were cooked long ago by taking food and fuel out of the core inflation statistics. The latest unemployment statistics reveal that jobs are going to non-citizens, not to citizens.
Biden’s team will tell you that lowered inflation for two or three quarters means that inflation is over, but that high unemployment and low growth for two or three quarters doesn’t mean that a recession has started.