Inflation has outpaced annual growth of weekly earnings for nearly every month of Biden’s tenure
Like a thief in the night, inflation has been robbing Americans blind for the last 2½ years.
As inflation reaccelerates, with August seeing the biggest monthly jump in over a year, the Biden administration is cherry-picking data to gloss over people’s pain. But the numbers don’t lie: Families are thousands of dollars worse off annually because of “Bidenomics.”
The Bureau of Labor Statistics’ newly released consumer price index data shows that prices have risen about 17% since President Biden took office. In August alone, prices rose 0.8%. That may not sound like much, but if prices continue at that monthly pace, annual inflation will be 7.8%, and prices will double in less than a decade.
Prices have risen so much faster than wages that people are demonstrably poorer today than when the president took office. Although a typical family’s weekly paycheck is about $230 bigger, it buys about $100 less. It’s the same as if that family had its annual income reduced by roughly $5,200.
On top of that, higher interest rates have made borrowing more expensive, especially on big-ticket items like homes. The monthly mortgage payment on a median-priced home is now twice what it was when Mr. Biden became president. That costs a family an extra $13,000 yearly for the same house.
Inflation has outpaced the annual growth of weekly earnings for nearly every month of Mr. Biden’s tenure. The disparity between nominal wages and real (inflation-adjusted) wages is so large that it now exceeds the average American worker’s federal income tax liability. In other words, in terms of real value, the average worker loses more of his or her pay to inflation than to federal income tax.
But the shocking scope of the inflation problem doesn’t end there. The Federal Reserve Bank of New York recently published data showing net household wealth hit a record high in the second quarter of this year. But those figures aren’t adjusted for inflation, which has robbed Americans of trillions in wealth.
Real net household wealth is down about 5% from the end of 2021 and is roughly flat since the end of 2020. That means all the net household wealth generated over the last 2½ years has effectively been transferred to the government through the hidden tax of inflation.
This is astonishing when one considers that there are supposedly over 10 million more people working today than there were 2½ years ago. All that added income did not increase the real wealth stock because it was roughly equal to the aggregate losses people suffered from inflation over that same time.
Despite Americans’ obvious financial pain, the Biden administration seems content to cherry-pick politically profitable data points from these reports. The White House crowed that the three-month average of core inflation (which excludes food and energy) was at the lowest level in two years. That’s true, but it ignores just about everything else moving in the wrong direction.
Core inflation is still over twice the Federal Reserve’s 2% target. In addition, monthly CPI figures over the last year clearly show that inflation has not even been trending toward 2% but more than 3%. As energy prices continue rising, that will cause prices across the economy to rise, putting further upward pressure on core inflation.
In short, this problem isn’t going away until we rein in spending. As Congress reconvenes this week to debate government spending for the coming fiscal year, they would do well to remember that their previous profligate spending fueled the inflationary crisis we face today. Until the spending is curtailed, inflation is here to stay.
• E.J. Antoni is a public finance economist at The Heritage Foundation and a senior fellow at the Committee to Unleash Prosperity.