Yesterday we broke down the numbers from the latest Consumer Price Index (CPI) report from the Bureau of Labor Statistics and the numbers were really bad for Joe Biden and the Democrats as consumer prices surged 8.3% last month compared with a year earlier.
However, a page full of indexes, indices, percentages and economic jargon probably made some of our readers eyes glaze over. Fortunately, our friend the noted economist Stephen Moore, one of the best communicators of economic information around, stepped in to help clarify what this disaster means for the average American worker.
In the latest issue of his must-read Committee to Unleash Prosperity Hotline, Mr. Moore explained that with the CPI up 8.3%, that’s four times the Fed target of 2%. Core inflation is over three times the Fed’s target. Food prices, housing, and rent prices, transportation prices, and utility prices have surged. Medical insurance is up 24%, but that’s another column. (If you’re not a subscriber to Steve’s Committee to Unleash Prosperity Hotline we urge you to subscribe – it’s free and has some of the clearest and best economic analysis you’ll get anywhere.)
The Fed has a LONG way to go in raising rates to get near the 2% target, noted Mr. Moore and stocks got “whacked” said Moore as investors concluded a 100-basis point rise in rates was an increasing probability.
But here is the key point Steve Moore made that we haven’t seen anywhere else: These inflation numbers translate into a $3,000 annualized loss in real income for the average American since Biden took office.
In other words, Biden and the Pelosi – Schumer Democrats have stolen $3,000 from you since they took power on January 20, 2021.
And Steve demonstrated this calculation through these important (but dispiriting) charts.
First, real incomes are shrinking.
Second, food inflation has been rising by double digits, with the 15.2% rise in potato prices the lowest in the market basket.
Third, and finally, non-food inflation is also galloping at double digit rates, with home heating oil (a staple in the Democrat states of the Northeast) rising a whopping 68.8% before the winter heating season has even begun!
The reality of inflation and the specter of a recession have been showing up in public opinion surveys all summer and appear to be weighing especially heavily on middle-class households.
Among those whose income falls in the $30,000-to-$100,000 range, 75% say their earnings are falling behind the cost of living, and 77% think the U.S. will be in a recession by the end of 2022, according to a July 2022 survey from Primerica reported by CNBC.
There’s also been a general uptick in financial worries ever since Joe Biden was sworn-in, with 39% of those surveyed expecting to be worse off financially in a year, up from 32% in March and 28% in December 2021. In December 2020, that share was 17%.
“There’s a higher level of concern financially among middle-income families than there was even at [the height] of the pandemic,” Glenn Williams, CEO of Primerica, told CNBC.
And there may be real political consequences for Democrats in these numbers, because middle and upper middle income suburban households are getting hit as hard or harder than even their lower income neighbors.
As the Wall Street Journal pointed out earlier this summer, economists at Bank of America Corp. estimate that upper-middle-class households, as well as the group right below them, are feeling inflation more than other income groups. These households spend a bigger portion of their budgets on driving expenses, since they tend to live in suburbs or more rural areas and commute into cities, they said.
Higher prices have pushed families of almost all income levels to start dipping into their pandemic savings this year. Upper-middle-class households started eating into their pandemic gains earlier and more aggressively.
Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households, both in aggregate and per household, according to Moody’s Analytics. (The poorest households are defined as those earning $28,400 or less a year.)
Mark Zandi, Moody’s Analytics’ chief economist, suggests that this is at least partially the result of government policy. Individuals earning more than $99,000 were barred from receiving any of the three pandemic stimulus checks, and those making upward of $75,000 received reduced payments or none at all. Similar “phaseout” income restrictions were placed on the $3,000 child-care tax credit.
The WSJ reported since June 2021, consumer sentiment for households earning $100,000 to $150,000 has fallen by the most of all economic groups, according to an index by data provider Morning Consult.
Those suburban voters, particularly white, educated women, are the voters Democrats must attract if they expect to keep a congressional majority after the November midterms, and right now, if those voters vote their pocketbooks Democrats are toast.
Control of Congress
federal budget deficit
Chair Jerome Powell
Consumer Price Index