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Contrary to the smug assertions of the White House and its stenographers in the corporate media, inflation did not, in fact, peak back in March. The Bureau of Labor Statistics published its finding that inflation rose by 8.6% in the year ending this May (or 1% just in May alone). While the BLS’s consumer price index recorded the greatest inflation in 40 years, that figure may in fact be an underestimate, not just due to the way the BLS weights various categories of spending in its basket of goods, but also because of the particularly egregious structure of our current inflation bout.
As the Biden administration once liked to boast, “core” inflation, or inflation without the volatile categories of food and energy, is slightly more stable than the overall inflation measure determined by the BLS. But although inflation is always regressive — that is, disproportionately taxing on the poor — inflation with stronger price spikes among food and energy renders the phenomenon even more regressive than usual.
We can normally expect any sort of economic distress to influence rational consumer behavior. A family may forgo their annual summer vacation or monthly sojourn to the local steakhouse, and trips to Whole Foods and Target may be replaced with shopping at Smart & Final and Walmart. But at a certain point, consumer demand is perfectly inelastic, or unresponsive to increases in price. The consumer price measure simply does not reflect that growing children cannot consume fewer calories or that mom and dad’s commute to work cannot consume fewer gallons of gasoline. In effect, the poorer a household is, the greater the real inflation rate it experiences.
The BLS grants shelter costs about a third of the weight of its overall inflation rate, food 14%, transportation commodities sans motor fuel 8%, and gas just 4%. But with inelastic demand, the consumer price index’s inflation misses many Americans spending a far greater share of their budgets on gas out of necessity. As illustrated by Axios, when gas spiked to an inflation-adjusted high in 2008, the lowest quintile of earners spent nearly 12% of their disposable income on gas, three times what the BLS allots for gas spending. When gas prices are up nearly 50% year-over-year, that means the difference between a significant swath of the country’s real inflation experience and the BLS’s inflation number is wildly different.
The most crucial categories of spending — shelter, transportation, and sustenance — are all skyrocketing in cost, and even worse, the prices of food at home are rising at nearly twice the rate of food in restaurants and other public venues. If you feel like that 8.6% value doesn’t measure just how much meaning your paycheck has lost in the past year, you’re probably not wrong; the government just doesn’t count your pain.
