Inflation is Not Just a Number

The Wall Street Journal reported on Tuesday that inflation ticked upward signaling that inflation has yet to be tamed and is nowhere near the target rate of 2.0 percent:

U.S. inflation was slightly stronger than expected last month but did little to change expectations that the Federal Reserve will begin cutting rates later this year.

Consumer prices rose 3.2% in February from a year earlier, the Labor Department said Tuesday, up slightly from economists’ expectations of 3.1%.

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Still, the report didn’t make the Fed’s coming deliberations easier. Core prices, which exclude food and energy items in an effort to better track inflation’s underlying trend, rose more than expected, both when measured from a year ago and a month ago.

Tuesday’s report “is likely to instill less confidence at the Fed that inflation is fast approaching its 2% target,” said Barclays U.S. economist Pooja Sriram.”

Reading this article and listening to the talking heads about it, one would conclude that it isn’t any big deal. After all, 3.1% isn’t that much different than 2.0% and even less so than 3.0%. But that’s what you get when you only look at one set of numbers. The fact of the matter is that the American consumers are, in fact, facing a whole different set of numbers and ones that paint a much different picture than this benign piece of information from the government – the United States Department of Labor, Bureau of Labor Statistics.

There are two elements. First, as noted above, the inflation index leaves out food and energy. The government claims they are “too volatile” to be included in the “basket” of consumer goods purchased. That is, not withstanding the fact that food and energy – next to housing – are the largest monthly purchases that consumers have no choice but to buy. Maybe if you are a Wall Street banker or trader making a seven figure income, or a public employee making $150,000 in wages and benefits, the cost of food and energy may be diminimus* but to the average Joe and Jane earning earning the national average wage of about $63,000 food and energy are a big deal. A recent article on Yahoo Finance noted:

People spend most of their budget on housing, transportation, and food, the Bureau of Labor Statistics found. People spent 33.3% on housing in 2023, 16.8% on transportation and 12.8% on food.”

That same article detailed the difference between the Consumer Price Index generated rate of inflation and that of just food:

Food prices increased by 5.8% in 2023, while inflation rose by 3.4%, according to the U.S. Department of Agriculture (USDA). The previous year saw an even steeper increase of  9.9%, the highest rate since the late 1970s. This broke down to an 11.4% increase for food-at-home prices and a 7.7% for eating-out prices.

Data from the U.S. Bureau of Labor Statistics found The second-biggest percentage increase for 2022 was in food spending, with a 12.7% boost, reflecting higher prices for all types of food purchases, according to the U.S. Bureau of Labor Statistics.

Leaving out two of the three largest monthly expenditures may fit that tight needs of the statistician and economists but it is extraordinarily misleading to those who are suffering far more than the 3.3% inflation detailed in the Labor Departments cold calculations.

The second fact, is that these reports fail to demonstrate the cumulative effects of inflation over a fixed period of time – for instance the time during which an administration and Congress are responsible for managing. But you can get the cumulative effect by going into the internal charts of the Bureau of Labor Statistics. So, for instance, when President Joe Biden (D) entered office in January of 2021, the Consumer Price Index stood at 261.582. By January of this year, it had increased to 308.417 – an increase of just shy of eighteen percent. This means that the average Joe and Jane were spending eighteen percent more to pay for the same amount of goods that they were purchasing just before Mr. Biden took office.

The Heritage Foundation has tracked other costs excluded from the Consumer Price Index. According to a report in February of this year, from January 0f 2021 through January of 2024 food prices have increased between 23% for Juices on the low end and 37% for flour on the high end. And for energy, the prices have increased from 22.5% for propane on the low end and 61.4% for heating oil on the high end. These are increases that are not part of the Consumer Price Index noted above but rather, in addition to those increases and yet they are for non-discretionary purchases – food and energy.

The vast majority of the increase in the inflation rate has been caused by government action. It is the result of deficit spending which requires the government to print more money to pay for government bonds sold to cover the borrowing to pay for the deficit. The result is there is more money in the market chasing the same level of goods produced. The robust American economy can usually withstand some level of deficit spending but not the level initiated by former President Donald Trump (R) after the economic collapse triggered by COVID and continued to absurdity with the deficit spending by Mr. Biden mostly to reward his followers well after COVID had been tamed. The point here is that while the Federal Reserve System has pursued its antiquated playbook for dealing with inflation, the president and the Congress have done nothing to curb deficit spending. In point of fact Mr. Biden has just delivered up his proposed newest budget that will increase deficit spending by at least $2.5 Trillion.

The irresponsibility of President Biden and the Congress is legendary and means that inflation will not return to sustainable levels, period. Watch for the talking heads starting to talk about the “new normal.” It may in fact be recurring but it is neither new or normal – it is wasteful and punitive particularly to working men and women. The recovery process has stalled because neither Mr. Biden nor the Congress will act responsibly. Even at that, the 3.1 percent will only be sustainable so long has America’s strong economy grows at current levels – an iffy proposition given that tax increases proposed at the federal and state levels along with the increasing burdensome regulations.

We are now admitting that the woke social agenda has been catastrophic. It’s time to acknowledge that the massive spending by the federal government is just as catastrophic.

And frankly, if your presidential candidate can’t spell balanced budget you should find one that can.


*Diminimis means of no consequence.