<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1654798609174,"cms.content.publishUser":{"_ref":"0000017c-98ff-dba3-adfd-dffff9c60000","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1654798609174,"cms.content.updateUser":{"_ref":"0000017c-98ff-dba3-adfd-dffff9c60000","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_54788932", "obj": {"id":"27789","width":"16","height":"9","video":"1029137"} }); rn","_id":"00000181-49ae-d702-a3cf-4fefe5040000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedThose who went to bed after watching the prime-time Jan. 6 hearing woke up to the reality of another decades-high inflation report.
While the House committee aired out its findings on the Trump administration’s handling of the Capitol riot Thursday night, the May inflation report was waiting for the Biden administration Friday morning, showing inflation at 8.6% for the 12 months ending in May — a 41-year high and a far cry from the Federal Reserve’s target rate of 2%.
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“It’s clear that inflation has become top of mind for the American people,” said Brookings Institution Senior Fellow Wiliam Galston. “They are not happy about the situation they find themselves in, where even rapidly increasing pay is not adequate to compensate them for the speed of the rise in prices.”
Democrats are hoping the Jan. 6 hearings provide a chance to recast their midterm message, but that will prove difficult with high prices eating into paychecks and the national average price for a gallon of gas heading toward $5.
The White House earlier this week conceded that Friday’s inflation report wouldn’t be pretty, citing gas prices and the related war in Ukraine as the causes.
“Given the impact of Putin’s price hike at the pump on gas prices in May, we expect the headline inflation number to be elevated,” said White House press secretary Karine Jean-Pierre. “And we expect the war in Ukraine to have some effects on core inflation too, particularly when you look at things like airfares and the effect of higher jet fuel costs.”
Gas prices are indeed up, at $4.97 a gallon on average, up from $4.33 last month and $3.07 this time last year, but they were already rising before the invasion. Prices stood at $2.31 per gallon when Biden took office and rose to $3.44 in November.
A similar trend stands with overall inflation, which was at 1.4% on Inauguration Day, reached 5% by May, 7% by November, and now 8.6%.
President Joe Biden is scheduled to promote inflation-fighting measures this morning from Los Angeles, a topic voters seem more worried about than Jan. 6.
Polling shows that high inflation is top of mind for consumers. Most expect it to get worse in the next year and are buying less as prices rise, according to a Washington Post/Schar School poll. Nearly 9 in 10 said they’ve started bargain hunting, with three-fourths cutting back on discretionary spending.
Biden has consistently touted the positive aspects of the economy, pointing to factors such as low unemployment and strong GDP growth.
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But no Biden administration talking points can distract from the reality of falling real wages, and the president’s statements haven’t helped, according to Heritage Foundation Research Fellow EJ Antoni.
“The talking points from this administration on inflation have been at least laughable and at worst Orwellian,” said Antoni, who researches fiscal and monetary policy for the conservative think tank. “They completely denied inflation was rising, then said it was transitory, then said there was inflation but it’s a good thing for some reason, then it was a high-class problem, and now it’s bad again but it’s Putin’s fault or because of meat producers or greedy corporations.”
The White House continues insisting inflation will level off and the economy will stabilize, citing a drop in core personal consumption expenditures from 6% to 4% in recent months. April’s inflation report showed the first year-over-year drop in inflation in eight months, but the overall trend continued with the latest report, which baked in the effect of higher gas prices.
A wider inflation fix is likely to include several more interest rate hikes at the Fed, which is expected to conduct half-point hikes this month and next. The risk in doing so is triggering a painful recession if rates go up too fast.
Antoni thinks a recession is now unavoidable, and the Fed should thus rapidly raise rates in order to stabilize the economy and prepare for a stronger recovery afterward.
At the other end of the political spectrum, Center for American Progress Senior Fellow David Madland says that COVID-19-related supply chain troubles and suppressed services spending are continuing to fuel inflation and argues that a recession can be avoided if the Fed doesn’t move too swiftly.
“They could go high enough that it causes a recession, and a recession is not good for most people,” Madland said. “If the Fed raises interest rates too high, they’re going to kill off lots of jobs and cause hardship for lots of people.”
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In any case, inflation is likely to be a problem for Biden and for voters in the foreseeable future.
“It’s likely to be a long war,” said Galston. “We’re not even at the end of the beginning of that war. Biden is trying to create realistic expectations about what’s going to happen, how fast it’s going to happen, and how much he personally can affect the trajectory.”
