President Joe Biden deserves an “F” for economic policy, especially policy on inflation. The Federal Reserve is at war against inflation. But it is losing. The September consumer price index report released last week offered a shockingly bad number. In spite of aggressive interest rate increases by the Federal Reserve, inflation is rising, not falling.
The CPI rose 0.4% in September, according to the Bureau of Labor Statistics. Over the last 12 months, the index increased by 8.2%. What makes the September inflation report so scary is that gasoline prices were down for the month, a 4.9% drop, according to the BLS, but over the past few weeks, gasoline prices are up about 6%, in part due to the Biden administration’s penchant for interfering in energy markets. Biden’s comments on Saudi Arabia and oil cause market volatility, which often leads to higher prices for both oil and gasoline.
THE STRONG DOLLAR OFFERS A LIFELINE AGAINST ECONOMIC DISASTER
Moreover, the Biden administration’s comments on inflation make a joke out of the economic pain people are experiencing. The White House said wage growth remains strong. That comment is nonsense. Hourly wages adjusted for inflation are off 3% from a year ago. Democrats carp about stagnant income growth. They should look in a mirror. They are the problem.
Labor markets remain extremely tight. The unemployment rate is at historically low levels. Job openings are very high. Tight labor markets are driving inflation. At 3.5%, the U.S. unemployment rate is tied with its 50-year low. The unemployment level is 0.5% below the Federal Reserve’s assessment of the long-run unemployment rate and 1 percentage point below the Congressional Budget Office’s assessment of full employment.
Measures of wage growth such as the Atlanta Federal Reserve’s Wage Growth Tracker and the employment cost index show continued rapid wage growth. The Wage Growth Tracker data from the Atlanta Federal Reserve showed wages growing at almost 7%, an extraordinary pace given secular productivity growth of 1-1.5%.
Put simply, the data show that people are hurting, and the Biden administration said that everything is fine. And people are hurting because the Biden administration adopted a “helicopter drop fiscal policy.” Democrats passed successive pieces of legislation, which acted as fiscal stimulus. Esteemed economists such as Larry Summers, Jason Furman, both Democrats, and Olivier Blanchard, a self-described “dove” on fiscal policy and the former chief economist for the International Monetary Fund, all said that Democratic stimulus legislation was too big and could lead to a wage-price spiral. They were right, and the public is paying the price.
Another problem? Biden cheers union power. Cartel-like unions drive up wages above the market clearing price. The rail unions continue to demand inflationary wage increases. West Coast dockworkers want inflation-busting raises, and now unionized steelworkers are achieving wage increases, which contribute to the national wage-price spiral. Making matters worse, Team Biden’s deeply flawed green energy policies will lead to sky-high home heating costs this winter. The U.S. Energy Information Administration said that homes that use natural gas for heating should expect their bills to increase by 28%. Households that use oil to stay warm should anticipate a 27% increase in cost.
An economic Alice in Wonderland is walking the halls of the White House.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
James Rogan is a former foreign service officer who later worked in finance and law for 30 years. He writes a daily note on finance and the economy, politics, sociology, and criminal justice.
