Consumer prices increased by 5.4 percent on an annualized basis in July, according to the Bureau of Labor Statistics (BLS). Inflation has remained consistently high, as the CPI increase was unchanged from June. In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. While inflation has already hit American families hard, President Biden is pushing policies which would this problem even worse.
Not only does inflation harm consumers by increasing household costs, but it can also have long lasting economic damage. Inflation erodes purchasing power, especially when wages do not keep up.
The erosion of purchasing power is especially concerning given that wages are decreasing. In June, seasonally adjusted real average weekly earnings decreased by 0.9 percent and seasonally adjusted real average hourly earnings declined by 1.7 percent. In July, wages continued to decrease. Real average hourly earnings decreased 1.2 percent, seasonally adjusted, from July 2020 to July 2021.
According to BLS, the cost of many goods and services have increased significantly over the past year:
- Gasoline has increased 41.8 percent in the past 12 months.
- Used cars and trucks have increased 41.7 percent in the past 12 months.
- Airfares increased 19 percent in the past 12 months.
- Food has increased 3.4 percent in the past 12 months.
- Meats, poultry, and fish have increased 5.9 percent in the past 12 months
- Bacon has increased 11.1 percent in the past 12 months.
- Fresh whole milk increased 6.2 percent in the past 12 months.
- Furniture has increased 8.8 percent in the past 12 months.
- Transportation services have increased 6.4 percent in the past 12 months.
88 percent of voters say they are concerned about increased inflation, according to a recent Harvard CAPS and Harris poll. When asked what causes inflation, the top three answers were “Massive government spending,” “Significant amounts of money being injected in the economy by the Federal Reserve,” and “Uncontrollable government deficits.”
On Wednesday morning, Senate Democrats approved the Democrat Fiscal Year 2022 budget resolution, setting the stage for $3.5 trillion in fanatical, wasteful spending. This will, inevitably, worsen inflation.
If the provisions in this plan are made permanent, the Committee for a Responsible Federal Budget (CRFB) estimates that the true cost could be between $5 trillion and $5.5 trillion over a decade. Flooding the U.S. economy with this kind of spending is bound to exacerbate inflation.
The Biden administration has also proposed trillions of dollars in tax hikes on businesses. This, similarly, will be passed on to consumers through higher prices. Raising the corporate income tax from 21 to 28 percent will certainly have this effect. According to a 2020 National Bureau of Economic Research paper, 31 percent of the corporate tax rate is borne by consumers through higher prices of goods and services.
The Biden administration and congressional Democrats should focus on growing the economy and helping businesses and working families. Instead, at the expense of Americans’ financial security, they are pushing massive new spending projects to finance a liberal wish-list.