OPINION:
On June 10, the Bureau of Labor Statistics released its monthly inflation report, which showed the Consumer Price Index increased 1.0% in May, reaching a 41-year high of 8.6%.
Per the report, “The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9% over the month with the gasoline index rising 4.1% and the other major component indexes also increasing. The food index rose 1.2% in May as the food at home index increased 1.4%.”
Making matters worse, as prices for almost all goods and services continue to increase at a stunning rate, Americans’ real earnings continue to go in the opposite direction. “Real average hourly earnings for all employees decreased 0.6% from April to May,” BLS notes.
In other words, working-class Americans are being squeezed like never before. As prices skyrocket for items they absolutely cannot live without — namely energy, food, transportation and shelter — their wages are unable to keep pace.
Because of this double whammy effect, Americans’ standard of living is trending in the wrong direction, with no end in sight.
So, how bad is the economic situation? Well, for most Americans living paycheck-to-paycheck is the new normal.
According to a March 2022 LendingClub report, 64% of Americans are struggling to make ends meet each and every month.
“The share of those who earn between $50,000 and $100,000 who report living paycheck to paycheck is also on the rise. In May 2021, 53% of these middle-income consumers lived paycheck to paycheck. In January 2022, 67% reported living paycheck to paycheck,” the report states.
Even more alarming, 48% of Americans earning more than $100,000 per year reported living paycheck to paycheck.
While Americans are besieged with higher costs and decreased earning power, many are resorting to using credit cards in order to pay the bills.
Per the Federal Reserve, “In April, consumer credit increased at a seasonally adjusted annual rate of 10.1%. Revolving credit increased at an annual rate of 19.6%, while nonrevolving credit increased at an annual rate of 7.1%.”
To put those numbers in context, in April 2022, Americans’ outstanding credit card debt increased by a whopping 20%, to a total balance of $1.103 trillion, a new all-time high.
This is particularly worrisome, considering that the Federal Reserve has announced that it will be increasing interest rates for the foreseeable future. As interest rates creep up, Americans’ interest payments on credit card debt (not to mention auto loan debt and mortgage debt) will become more untenable.
Despite all of this gloomy news, the Biden administration and Congress seem to be wholly disinterested in fixing the colossal economic mess they have created. In fact, many in the Biden administration, including the president, would have you believe that the economy is in tip-top shape.
For instance, President Biden recently tweeted, “America is in a stronger economic position today than just about any other country in the world.”
Unless and until the Biden administration addresses the core drivers of inflation — too much government spending coupled with anti-growth regulations and tax policies that stifles the production of goods and services — the problem is likely to become worse before it becomes better.
Of course, this is bad news for the vast majority of Americans, who are already feeling the pain of runaway inflation and declining purchasing power. However, the good news is that the policies that have led to this inflationary disaster are completely reversible.
It is not set in stone by any means that the U.S. economy, which was firing on all cylinders not that long ago due to former President Donald Trump’s pro-growth policies, including across-the-board tax cuts, regulatory reforms and energy independence is destined to fall into a stagflationary spiral.
However, time is of the essence. With every passing month, the situation becomes grimmer for millions of American families struggling to put food on the table and gasoline in the tank.
Instead of trying to score cheap political points with out-of-touch tweets, it would behoove the Biden administration to realize the errors it has made and reverse course.
Although I think the odds of that happening soon are somewhere between slim to none, there will come a point when it is no longer politically palpable for Mr. Biden and Democrats in Congress to ignore the inflation elephant in the room. The only question that remains is, will that occur before or after the 2022 midterm elections?
• Chris Talgo (ctalgo@heartland.org) is senior editor at The Heartland Institute.
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