Money & The Economy

Biden Says Inflation Is Moving In The Right Direction. The Numbers Paint A Different Picture

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President Joe Biden has repeatedly touted that the pace of inflation is slowly trending in the right direction, but recent data has led experts to cast doubt on that claim.

The consumer price index (CPI) increased 0.3% in April, the third month in a row of consistently high inflation, bucking trends seen in the second half of 2023, where inflation was looking to descend below 3%. Inflation data for the first few months of 2024 casts doubt on whether the rate of price increases is actually moving closer to the Federal Reserve’s target of 2%, meaning inflation could continue to squeeze Americans for longer than expected, experts told the Daily Caller News Foundation.

“There’s nothing in the data that says we are trending towards 2%,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “The people saying that are engaged in little more than wishful thinking and political punditry, not empirical analysis. To have an annual inflation rate of 2%, you need to have monthly inflation rates between 0.1% and 0.2%. Instead, we have consistently averaged higher than that since June 2022. We have been trending towards an annual inflation rate in the low 3’s and have arrived there, with no indication we are going significantly lower anytime soon.

From February 2021 until the height of inflation under Biden in June 2022, the average annualized monthly rate of inflation was 8.6%, but instead of transitioning to trending toward 2%, inflation from July 2022 to April 2024 has moved at an average annualized rate of 3.3%, according to data calculated by the DCNF. During the Trump administration, from February 2017 to January 2021, that same rate was just 1.9%.

Biden has repeatedly claimed that inflation is moving in the right direction by pointing out that “inflation has fallen more than 60% from its peak,” comparing the rate at its highest of 9% year-over-year in June 2022 to its current rate. While the rate of inflation has dropped significantly, prices are still 19.3% higher than when Biden first took office and are rising every month.

“Fighting inflation and lowering costs is my top economic priority. I know many families are struggling, and that even though we’ve made progress we have a lot more to do,” Biden said in a statement following April’s CPI report. “Prices are still too high — so my agenda will give families breathing room by building two million new homes to lower housing costs, taking on Big Pharma to lower prescription drug prices, and calling on grocery chains making record profits to lower grocery prices for consumers.”

The president and his advisors have also resorted to claiming that the inflation rate was at 9% when Biden took office, despite the rate being around 1.4%.

“Looking at month-to-month core CPI (without the food and energy components) on a non-seasonally adjusted basis, the last three quarters of 2023 came in at 0.0% (October 2023), -0.2% (November 2023), and then a -0.1% (December 2023) change. That’s what the Fed wanted to see,” Peter Earle, economist at the American Institute for Economic Research, told the DCNF. “But for core CPI in the first three months of 2024, again on a monthly basis, shot up 0.5% in January, 0.6% in February, and 0.6% in March. In April, the index rose 0.4%. That’s lower, of course, and in the direction the Fed would like. But it will take another few months to see if the prices are indeed decelerating or whether there’s another ramp up ahead.”

Excluding the volatile categories of food and energy, recent data provides much more evidence that the rate of inflation is decelerating, but core CPI still remains above the overall CPI year-over-year at 3.6% year-over-year. Disinflation in core CPI similarly slowed its pace of decline in October 2023, having only decelerated 0.4% since then.

Jai Kedia, a research fellow in the Center for Monetary and Financial Alternatives at the Cato Institute, disagrees that inflation is moving in the wrong direction, pointing to recent upward price pressures being largely focused in the shelter and energy categories. Shelter prices often lag behind general inflation because agreements like leases have long contracts, and energy is very volatile due to international fluctuations.

“Rent CPI is lagged and requires several months before it catches up with the economy-wide inflation trend,” Kedia told the DCNF. “Energy prices are too volatile and shouldn’t be used to make any claims about underlying inflation. 70% of the monthly increase in prices came from these two sources — shelter and energy — so people should not overreact to the April inflation report. Inflation expectations are trending down, which is probably the best indicator for the future path of prices, so the US is likely still on track to get to 2%, even if it may take longer than originally anticipated.”

Inflation trends at the end of 2023 led the Fed to project that there would be around three rate cuts by the end of 2024, but recent data has led market watchers to doubt that prediction. A majority of investors now don’t predict a rate cut from the Fed until September, according to CME Group.

“The reason for this persistently high inflation is excessive government spending, paid for by deficits, financed through expansion of the money supply,” Antoni told the DCNF. “Instead of cutting interest rates and reducing the runoff of the balance sheet, the Fed should allow interest rates to seek their own level and reduce the balance sheet even faster. As long as the Fed and Treasury work hand in glove to pay for trillions of dollars in government spending through the hidden tax of inflation, the pain will not stop.”

The national debt has increased by around $6.7 trillion since Biden first took office in January 2021, from around $27.8 trillion to $34.5 trillion, according to the Treasury Department. The Biden administration has pursued a number of high-spending policies that have added to the deficit, including the American Rescue Plan and the Inflation Reduction Act, which authorized $1.9 trillion and $750 billion in new spending, respectively.

The failure to reduce inflation back to its 2% target has wreaked havoc on the value of wages, which struggle to keep up when inflation progresses too quickly.

April’s inflation report showed a decline of 0.4% in real wages for the month, equating to a 4.8% decline in weekly earnings since the president took office. The decline in wages is due to a reduction in hours as employers adjust to slack in business or increase the share of part-time positions as increases in pay fail to keep up with inflation.

The president has consistently claimed that recent inflation is being fueled by “corporate greed” and markups by companies taking advantage of American consumers. The Federal Reserve Bank of San Francisco disproved this claim by pointing out that corporate markups following the COVID-19 pandemic were largely similar to other economic recoveries when there was not a similar spike in inflation.

The White House did not respond to a request to comment from the DCNF.

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