Dems’ Reckless Taxing-And-Spending Spree Will Double Down On Already-Accelerating Inflation

With Prices For Everything From Groceries To Gas, Housing, And Heating Going Up, Democrats’ Gargantuan Spending Plans Are Primed To Fuel Inflation Even More, Which Will Further Erode Americans’ Wages

SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): “Over the past several months, American families have had to contend with an historic amount of painful inflation. This summer we saw the prices for core personal consumption soar at the fastest pace in nearly 30 years. Last month, the producer price index notched its steepest year-on-year jump in more than a decade. Across the country, across the economy, families and businesses are being hit hard…. This is exactly what Republicans, independent experts, and even liberal economists warned would happen if Democrats started ramming through massive inflationary spending. Back in the springtime, Larry Summers, a top economic adviser to both President Clinton and President Obama, warned at the time that runaway spending could, quote, ‘set off inflationary pressures of a kind we have not seen in a generation.’ Well, just ask any working family in this country about their last trip to the gas station, the grocery store, or the car dealership. Inflation has gotten so bad on Democrats’ watch that it has wiped out every ounce of the average American worker’s pay growth during this economic recovery – and then some. Annual real wage growth is negative even though employers have been handing out raises. Because of inflation.” (Sen. McConnell, Remarks, 9/22/2021)

  • LEADER McCONNELL: “You might think the disastrous consequences of Democrats’ last spending binge for working Americans might give our colleagues some pause about their next one. No such luck. Behind closed doors, they’re putting together another, even more reckless taxing and spending spree. They want to take the last bill, which Democrats called the most left-wing law in American history, and dwarf even that. Massive tax hikes on Americans that will hurt families and help China. A socialist transformation that nobody voted for. Another invitation for even for more painful inflation that will hit working Americans where it hurts. The American people don’t want it. And Senate Republicans won’t support it.” (Sen. McConnell, Remarks, 9/22/2021)


Inflation Indices Keep Hitting Highs Not Seen In Decades

“Inflation at the wholesale level climbed 8.3% last month from August 2020, the biggest annual gain since the Labor Department started calculating the 12-month number in 2010. The Labor Department reported [September 10th] that its producer price index — which measures inflationary pressures before they reach consumers — rose 0.7% last month from July after increasing 1% in both June and July…. Over the past year, wholesale food prices have climbed 12.7%, including surges of 59.2% for beef and 43.5% for shortening and cooking oil. Energy prices rose 0.4% from July and are up 32.3% over the past year.” (“US Producer Prices Jump An Unprecedented 8.3% In August,” The Associated Press, 9/10/2021)

“The consumer price index, which measures a basket of common products as well as various energy goods, increased 5.3% from a year earlier and 0.3% from July. … The 5.3% annual increase still keeps inflation at its hottest level in about 13 years…” (CNBC, 9/14/2021)

  • BUREAU OF LABOR STATISTICS: “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in August on a seasonally adjusted basis after rising 0.5 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.3 percent before seasonal adjustment. The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0 percent, mainly due to a 2.8-percent increase in the gasoline index. The index for food rose 0.4 percent, with the indexes for food at home and food away from home both increasing 0.4 percent.” (Press Release, Bureau of Labor Statistics, 9/14/2021)

The rate of inflation in the U.S. rose again in July and drove the increase over the past year to a 30-year high, pointing to fresh strains on businesses and consumers as the economy recovers from the pandemic. The personal consumption expenditure or PCE price index climbed 0.4% in July, government figures show. It was the fifth big increase in a row. The rate of inflation in the 12 months ended in July edged up to 4.2% from 4% — the highest rate since the first Gulf War in 1991…. A separate measure of inflation that strips out volatile food and energy prices rose 0.3% in July. It’s known as the core rate … The increase in the core rate over the past 12 months was unchanged at 3.6%, keeping it at a 30-year high. The PCE index is viewed as a more accurate measure of inflation than the consumer price index or CPI. It tracks a broader range of goods and gives more weight to substitution — when consumers buy a cheaper product to substitute for a more expensive one.” (“Inflation Rate Hits 30-Year High, PCE Shows, As U.S. Confronts Major Shortages,” MarketWatch, 8/27/2021)

“The S&P/Case-Shiller index, which measures home prices across 20 major U.S. cities, rose 1.77% in June, bringing the year-over-year gain to a staggering 19.1%. That’s the largest jump in the series’ history going back to 1987. For perspective, the biggest annual gain in prices prior to the subprime meltdown and 2008 financial crisis was the 14.4% increase in September 2005.” (“Two More Factors Have Popped Up That Add To The Fed’s Inflation Worries,” 8/31/2021)


Prices For Family Necessities Like Groceries, Gas, Housing, And Heating Are All Still Going Up

“Grocery prices have risen at a 4.3% annual pace since February 2020, according to Labor Department data, the sharpest increase since 2012…. Though grocery prices overall have climbed at a steady rate throughout the pandemic, some foods have surged even more in recent months. Sliced bacon, for example, was selling for about $7.10 a pound in August, up more than $1 since March.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“Gasoline prices plummeted at the start of the pandemic but have since more than rebounded. As of August, they had risen at an 11.1% annualized rate since February 2020, Labor Department data show. Prices have continued climbing and were $3.26 a gallon in early September, hovering at the highest in seven years, according to the U.S. Energy Information Administration.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“Rent is a key concern too…. From June through August, rent rose at an annual rate of 2.8%, according to Labor Department data. That measure tends to lag the latest market developments. Rents tracked by Zillow, an online real-estate company, were up 9.2% in July from a year earlier, as demand increased among people who can’t afford to buy homes and some young professionals returned to cities. Zillow estimates the typical U.S. rent in July was 2.9% higher than if rents followed their pre-pandemic trend.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“Even in the hottest U.S. housing market in more than a decade, new home construction has turned into a frustratingly uncertain and costly proposition for many homebuilders. Rising costs and shortages of building materials and labor are rippling across the homebuilding industry, which accounted for nearly 12% of all U.S. home sales in July. Construction delays are common, prompting many builders to pump the brakes on the number of new homes they put up for sale. As building a new home gets more expensive, some of those costs are passed along to buyers. Across the economy, prices having spiked this year amid shortages of manufactured goods and components, from cars and computer chips to paint and building materials…. Lumber futures jumped to an all-time high $1,670 per thousand board feet in May. They’ve since dropped to $634, about 10% higher than a year ago. Still, wholesale prices for a category of homebuilding components that includes windows, roofing tiles, doors and steel, increased 22% over the last 12 months, according to an analysis of Labor Department data conducted by the National Association of Home Builders. Before 2020, it was typical for such aggregate prices to rise a little over 1% annually. Those conditions are likely to persist. Robert Dietz, chief economist at the NAHB, said he’s heard from builders that ‘there are ongoing challenges, and in some cases growing challenges, with flooring, other kinds of building materials.’” (“Inflation Forces Homebuilders To Take It Slow, Raise Prices,” The Associated Press, 9/20/2021)

“Natural-gas prices have surged, prompting worries about winter shortages and forecasts for the most expensive fuel since frackers flooded the market more than a decade ago. U.S. natural-gas futures ended [September 17th] at $5.105 per million British thermal units. They were about half that six months ago and have leapt 17% this month.” (“Natural-Gas Prices Surge, and Winter Is Still Months Away,” The Wall Street Journal, 9/19/2021)


It’s No Wonder, Then, That Consumers’ Expectations For Inflation ‘Rose Last Month To The Highest Levels Since 2013’

“U.S. consumers' expectations for how much inflation will change over the next year and the coming three years rose last month to the highest levels since 2013, according to a survey released on Monday by the New York Federal Reserve. Year-ahead inflation expectations increased for the 10th straight month to a median of 5.2% in August, according to the monthly survey of consumer expectations. Inflation expectations over the next three years increased to a median of 4.0%. Both metrics are at the highest they've ever been for the survey, which was launched in 2013.” (“U.S. Consumers' Inflation Expectations Highest Since 2013, NY Fed Says,” Reuters, 9/13/2021)

‘The Wage-Price Spiral Means That When Inflation Expectations Rise It Is Difficult To Bring Down Inflation’

“Inflation expectations are simply the rate at which people—consumers, businesses, investors—expect prices to rise in the future. They matter because actual inflation depends, in part, on what we expect it to be…. All else equal, if inflation expectations rise by one percentage point, actual inflation will tend to rise by one percentage point as well.” (Tyler Powell and David Wessel, “What Are Inflation Expectations? Why Do They Matter?,” Brookings Institution, 11/30/2020)

  • “Central bankers’ focus on inflation expectations reflects the emphasis that academic economists, beginning in the late 1960s (including Nobel laureates Edmund Phelps and Milton Friedman), put on inflation expectations as key to the relationship that ties inflation to unemployment. As a result of the persistently high inflation in the 1970s and 1980s, inflation expectations became unanchored and rose with actual inflation—a phenomenon known at the time as a wage-price spiral. This cycle plays out as follows: high inflation drives up inflation expectations, causing workers to demand wage increases to make up for the expected loss of purchasing power. When workers win wage increases, businesses raise their prices to accommodate the increase in wage costs, driving up inflation. The wage-price spiral means that when inflation expectations rise it is difficult to bring down inflation, even if unemployment is high.” (Tyler Powell and David Wessel, “What Are Inflation Expectations? Why Do They Matter?,” Brookings Institution, 11/30/2020)


Inflation Is Also Eating Away At Workers’ Gains In Wages, And It Hits Lower-Wage Workers Especially Hard

“This should be the best of times for low-wage workers, as pandemic-induced labor shortages force employers to sharply raise pay. Yet for many, it doesn’t feel that way, because those same disruptions have pushed inflation to near its highest rate in over a decade…. Overall consumer prices rose 5.3% in August from a year earlier, a slightly slower pace than in June and July but still near a 13-year high, said the Labor Department. That means that for the lowest-earning tier of workers, ‘real’ wages—pay adjusted for inflation—fell 0.5% in August from a year earlier, according to data from the Atlanta Fed and the Labor Department. That contrasts with 2.1% annual growth in the two years before the pandemic…. Low-wage workers are doing better than workers as a whole in terms of pay increases: All workers’ pay—including low-wage workers—fell 1.8% in the year through August, adjusted for inflation, according to data from the Atlanta Fed and the Labor Department. (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

  • “Companies couldn’t hire fast enough and boosted pay to attract workers and retain those they had. Employees in typically low-paying jobs such as those in restaurants, airports and hotels reaped the biggest wage gains. Annual wage growth for the 25% lowest-earning workers was running at 4.8% in August, according to the Federal Reserve Bank of Atlanta. That was the highest rate of growth since 2002, and slightly above the 4.7% reached in the months before the pandemic, when unemployment hit a historically low 3.5%. Annual wage growth for the highest-earning workers, by comparison, was 2.8% in August.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

‘Lower-Income Households Spend Proportionately More On Many Commodities Whose Prices Have Gone Up The Most, And Thus Effectively Face A Higher Inflation Rate’

“In fact, economists say, lower-income households spend proportionately more on many commodities whose prices have gone up the most, and thus effectively face a higher inflation rate…. Historically, spending on certain household necessities has made up a larger proportion of lower-wage households’ budgets. Prices for many categories that make up more of their budget—such as rent, energy, beef and eggs—rose more than the overall CPI between 2003 and 2018, according to an analysis by Labor Department economists Anya Stockburger and Josh Klick. As a result, this research indicates that annual inflation experienced by the lowest-earning income quartile was 0.3% higher than for the top-earning quartile.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“[G]roceries, gas and rent accounted for a larger share of spending among lower-income households than among higher earners between mid-2019 and mid-2020, according to a Labor Department survey. Over that period, prices for these items all rose briskly, though not all grew more than prices as a whole, the survey showed. Households making less than $40,000 a year spent an average of 9.8% of their budgets on groceries, compared with 7.1% for higher-earning households’ budgets…. Lower-income families spend proportionately more on groceries such as fish, poultry, meat and eggs, which rose an annualized 8.1% during that time…. Low-income families also spend proportionately more on gasoline…. Rent is a key concern too. Lower-income households, on average, spend a much higher share of their budgets on rent, compared with higher-income families, and relatively more of them rent…. With limited means to compensate for higher prices, lower-earning households may have to cut back spending if prices continue to climb quickly.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

  • “Pandemic-driven disruptions are likely exacerbating the burden of transportation costs for many lower-income workers, said [accounting firm] Grant Thornton’s [chief economist Diane] Swonk. Leisure and hospitality jobs have shifted away from urban centers with public-transportation infrastructure and more toward vacation hubs or suburban areas. Employment in that sector was down 36.5% from pre-pandemic levels as of July in New York and 22.5% in Chicago, compared with 10% nationwide. To return to work, some of those workers must buy vehicles and spend more on gasoline, Ms. Swonk said. That’s at a time when used-car prices are 31.9% higher than a year ago and gasoline is about 60 cents a gallon more than in January 2020.” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

‘I’m Making More Money. I Should Be Able To See It … But I Don’t See It Because I’m Paying More Money For Stuff Now.’

“Troy Sutton, age 61, lost a job as a custodian at the start of the pandemic in 2020 that paid $12 an hour, and he spent more than a year unemployed. This past summer, he landed a job as a custodian at the University of Pennsylvania he said pays $18 or more an hour. But Mr. Sutton’s water, electricity and cable bills are higher than a year ago, he said. He is shelling out more for veterinary checkups and dog food ... At the supermarket near Mr. Sutton’s house in Philadelphia, eggs climbed from about $2 a dozen in 2019 to $3.69 during the pandemic. He and his wife started shopping more at supermarket chain Aldi this year, where many groceries are cheaper, he said. But the longer drive and higher gas prices have eaten up some of the savings. He has also cut out brand-name cereals, rice, oatmeal, ketchup and mustard. ‘I’m making more money. I should be able to see it,’ Mr. Sutton said. ‘But I don’t see it because I’m paying more money for stuff now.’” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“Han Park, a 27-year-old from Norcross, Ga., serves up sandwiches and cleans as an assistant manager at Jimmy John’s. The fast-food joint raised her pay to $14 an hour this summer, she says, her second pay raise since January, when she made $11 per hour. But rent for her shared two-bedroom apartment was up 6.5% this summer compared with December, she said, offsetting some of her pay gains. ‘I still make just enough to pay my rent, pay my bills and my groceries, but really nothing else,’ Ms. Park said. ‘I’m just kind of scraping by still.’” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)

“Rebecca Reitnauer, age 37, works as a barista for a Starbucks -licensed store at the Sacramento International Airport, a 30-to-40-minute commute from her home in Citrus Heights, Calif. She said it used to cost $45 for a tankful of gas but now costs more than $80. She and her partner—who also works at the airport—are considering moving in with Ms. Reitnauer’s mother, a 10-minute car ride from the airport, to lower their transportation costs. A move would also keep electricity costs in check, she said, after their electricity bills more than doubled earlier this year. ‘It’s just really been rough,’ said Ms. Reitnauer. ‘You start feeling like you’re sinking and you’re like, “What are you going to do?”’” (“What’s Your Raise Really Worth? Inflation Has Something to Say About It.,” The Wall Street Journal, 9/14/2021)


‘[W]hen Americans Are Asked To Name The Top Economic Problem Facing Their Family Today, Rising Prices And The Cost Of Living Are The Overwhelming Top Issue’

An August Fox News poll found 86% of registered voters extremely or very concerned about inflation and higher prices. (Fox News Poll, 8/11/2021)

“[A]ccording to a new CNN poll conducted by SSRS … a rising share of Americans … say things in the US are going badly and that the economy is in poor shape, with increased worries about the coronavirus, the economy and crime. The new poll finds 69% of Americans say things in the country today are going badly …” (“Americans Turn Pessimistic Amid Concerns Over Economy And Coronavirus,” CNN, 9/10/2021)

“77% of Americans say they are worried about the state of the economy in their community, up sharply from 58% who said the same last summer…. [M]ajorities across parties express concern about the economy (70% among Democrats, 76% among independents), and overall assessments of the state of the economy have worsened since the spring. In April, 54% said the economy was in good shape, the first time that figure had crossed 50% since before the start of the pandemic, but now, only 38% say the economy is in good shape, with declining ratings coming from both Democrats and Republicans.” (“Americans Turn Pessimistic Amid Concerns Over Economy And Coronavirus,” CNN, 9/10/2021)



Related Issues: Inflation