Inflation continued its once-in-a-generation surge in January, reaching a rate of 7.5%.
According to the United States Department of Labor, the Consumer Price Index (CPI) — which tracks costs faced by the typical American family — attained its highest rate of increase since February 1982. Core CPI, which does not consider volatile categories such as food and energy, increased by 6% year-over-year.
Inflation refers to the erosion of a currency’s purchasing power. Though nominal wages are rising as the American economy recovers from COVID-19 and the lockdown-induced recession, “real average hourly earnings” — which consider the effect of inflation — fell by 2.4% last year.
Nevertheless, President Joe Biden insisted that Americans should have “peace of mind” amid the record-setting inflation.
“Look again, slight digression, inflation is up. It’s up,” Biden said. “And, coming from a family when the price of gas went up you felt it in the household, you knew what it was like, it matters.”
“But the fact is that — if we are able to do the things that I am talking about here, it will bring down the cost for average families. It will bring down the cost for average families, I don’t know why they keep moving and all that, but the fact is they keep down the cost for average families,” Biden said, though it was unclear which “they” he was referring to in his comment.
“The fact is we’re in a situation now where you should have peace of mind,” Biden continued. “I know food prices are up, and we’re working to bring them down. As I said, I grew up in a family where the price at the pump went up, you felt it. I understand. But these things are necessities.”
Other members of the Biden administration are pinning the blame for high prices on corporations, such as supermarkets and meatpackers.
“Just four large conglomerates control the majority of the market for beef, pork, and poultry products, and the data show … that there have been increases in meat prices while the companies have generated recent record profits,” White House Press Secretary Jen Psaki told a reporter earlier this week.
“If you look at historical precedent here, 50 years ago ranchers got over $0.60 for every dollar a family spent on beef. Today, they get about $0.39,” she added. “50 years ago, hog farmers got $0.40 to $0.60 for each dollar they spent. Today, it’s about $0.19, and the big companies are still making major profits.”
“It certainly shouldn’t work that way,” Psaki concluded. “As the president said many times, capitalism without competition isn’t capitalism, it’s exploitation. And we have continued concern about the lack of competition in these industries.”
Many economists, however, are pessimistic about price levels in the United States. Larry Lindsey — the director of the National Economic Council under President George W. Bush — recently warned that inflation could be “above” 2021 levels in 2022.
“There is never an example of getting inflation to this level, embedded in the labor market, and it ending without recession. … I don’t think we’re going to have a recession this year,” he said during an interview with Fox Business anchor Maria Bartiromo. “Slower growth, maybe. So I don’t think there’s any chance at all of decelerating inflation.