The high inflation rate has slammed Americans in the pocketbooks as basic costs of living – such as food, electricity, gas, and shelter – have skyrocketed during Joe Biden’s presidency.
Inflation hit a 40-year high in January, with prices rising 7.5% from last year. That number was driven by higher costs of food, electricity and shelter costs, the Bureau of Labor Statistics said on Thursday. Medical costs have also risen during the pandemic.
The number was an unpleasant surprise for the White House, which continues to argue that inflation will naturally go down over the next year. It also presents a dilemma for the Federal Reserve, which is weighing raising interest rates in March.
But while Washington dithers, Americans are paying the price.
Apartment rental costs rose 0.5% in January, the fastest pace in 20 years. Electricity prices were up 4.2% last month, the sharpest rise in 15 years and a 10% increase from last year.
Additionally last month, household furniture and supplies rose 1.6%, the largest one-month increase on records dating to 1967.
The average U.S. household is spending an additional $250 a month because of inflation, according to analysts.
‘A lot of people are hurting because of high inflation. $250 a month – that’s a big burden,’ Ryan Sweet, a senior economist at Moody’s Analytics who conducted the analysis, told the Wall Street Journal.
Apartment rental costs rose 0.5% in January, the fastest pace in 20 years and electricity prices were up 4.2% last month, the sharpest rise in 15 years and a 10% increase from last year
Clothing prices were also up – 1.1% and household furniture and supplies rose 1.6%, the largest one-month increase on records dating to 1967.
Inflation hit a 40-year high of 7.5 percent, the Labor Department announced Thursday, a figure not seen since the Carter administration
Prices rose for a sixth consecutive month, meaning Americans have consistently had to shell out more for everyday life since August 2021
Wages have increased but not enough to keep up with rising costs of basic necessities. Even with wages up around 5.7%, taken in with inflation, it’s resulted in an average 2% pay cut for workers.
Biden’s poll numbers have sunk as inflation has risen. His approval rating hit below 40% this week for the first time in the RealClearPolitics polling average. Americans have given him low marks for his handling of the economy and have expressed frustration with the current economic situation.
Grocery prices were up nearly across the board in January, averaging a 1% increase for the month.
President Joe Biden, in addressing the record high inflation, repeated his argument it would go down by the end of the year
Cereals and baked goods saw the highest increase, rising 1.8%. The price of dairy goods rose 1.1% while fruits and vegetables rose 0.9% and meats, poultry, fish, and eggs rose 0.3%.
The only food group that didn’t see a price rise raise was nonalchoholic beverages, which was unchanged.
The last time inflation was at 7%, Reagan was newly in office and the ‘Great Inflation’ was ending
The ‘Great Inflation’ period from 1965 to 1982 was marked by soaring inflation that topped 14 percent by 1980
The January inflation reading on Thursday put annual inflation at 7.5 percent, the highest level since February 1982, as the period known as the ‘Great Inflation’ was coming to a close.
Spurred by failed monetary policy and two oil crises in 1973 and 1979, the period from 1965 to 1982 was marked by soaring inflation that topped 14 percent by 1980.
Consumers suffered greatly from the rising prices, and outrage over the inflation crisis contributed to Ronald Reagan’s defeat of one-term incumbent President Jimmy Carter in 1980.
‘Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man,’ Reagan famously said, and he devoted the first years of his presidency to tackling the issue.
Reagan’s controversial economic policy had four key pillars: reducing government spending, slashing taxes, reducing regulations, and tightening the monetary supply through higher interest rates.
Naysayers claimed at the time that Reagan’s policies would drive prices even higher, but history proved them wrong and inflation was soon back to sustainable levels.
A woman shopping in the Pioneer grocery store, New York City, USA, March 1983
The rising cost of food has had a trickle down effect with popular chain restaurants like Chipotile, Starbucks and McDonalds raising prices due to the combination of inflation and the high demand for supplies.
Clothing prices were also up – 1.1%.
Energy costs were also on the rise for Americans. Electric costs increased sharply in January at 4.2%. Electricity rose 10.7% over the last year.
Gas prices declined slightly in January but were up 40% over the past year. Natural gas prices were also down in January but over the last year have risen 23.9%.
Meanwhile, new car prices were unchanged last month but are up 12.2% from a year ago.
That has affected the price of used-cars, which rose 1.5% in January and are up a 41% from a year ago.
Wells-Fargo broke out the affect of inflation on different demographic groups. Their findings:
- Middle-class households were squeezed harder than other groups, with prices up 6.7% in December.
- Hispanic or Latino households faced inflation of 7.1%.
- Asian families saw a 5.6% increase.
- Those ages 35-44 saw their costs rise 6.9% in 2021, higher than any other age group.
- Those ages 65 and up experienced 5.8% inflation.
Some Democrats have fretted the high cost of living will hit them at the ballot box in this November’s midterm election, where control of Congress is at stake.
Even members of Biden’s own party are distancing themselves from the economic disaster, with West Virginia Senator Joe Manchin taking a veiled swipe at the White House for seeming to ‘think that spending trillions more of taxpayers’ money will cure our problems.’
‘It’s beyond time for the Federal Reserve to tackle this issue head on, and Congress and the Administration must proceed with caution before adding more fuel to an economy already on fire,’ the West Virginia Democrat said in a statement.
Montana Democrat Sen. Jon Tester also expressed worries about the new numbers.
‘They’re concerning,’ he told reporters. ‘I think we’re just coming out of a pandemic. But I still think that we need to start doing some things in a positive way to lower inflation … Congress needs to be proactive on and just can’t sit on their hands.’
Biden released a statement acknowledging the ‘elevated’ numbers in Thursday’s report but continued to insist it would ease by the end of the year.
‘While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022. And fortunately we saw positive real wage growth last month, and moderation in auto prices, which have made up about a quarter of headline inflation over the last year. We separately saw good news with new unemployment claims continuing to decline. That’s a sign of the real progress we’ve made in getting Americans back to work over the last year,’ the president said.
‘My administration will continue to be all hands on deck to win this fight. We will continue to rebuild our infrastructure and manufacturing, so we can make more in America and strengthen our supply chains here at home.
We will continue to fight for costs in areas that have held back families and working people for decades, from prescription drugs to child care and elder care to their energy costs. And we will continue to promote more competition to make our markets more competitive and give consumers more choices.’