10.18.21

Economists’ Inflation Fears Realized As American Families Will Be Paying More ‘Well Into Next Year’

With Prices Spiking On ‘Everything From Gasoline To Groceries,’ Including Housing And Winter Heating, Americans Are Struggling With ‘Unavoidable Inflation Taxes’ As Democrats Double Down On The Reckless Government Spending That Helped Usher In These Rising Costs

 

SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): “There’s a famous saying: If you find yourself in a hole, the first thing to do is stop digging. Well, my Democratic colleagues’ policy decisions have dug our economy into a deep hole. And American families desperately need them to stop digging. The families of this country are currently battling the worst inflation in well over a decade. Over the last 12 months, consumer prices have shot up by 5.4%. Gasoline prices and food prices each increased by a full 1.2% just last month alone. That is in just one month. Year on year, groceries are about 4.5% more expensive than they were at this time in 2020. Look at housing. Rent jumped a full half a percentage point just in September alone. That was the biggest monthly jump in 20 years. On paper, American workers have been getting raises. The average worker’s paychecks have gotten bigger over the past year. But the Democrats’ inflation has cannibalized all of these gains and then some…. And even the households that have enjoyed pay raises are contending with major shortages of the things they want to buy, and rapid and unpredictable price changes…. What is especially remarkable and especially sad is that our national inflation nightmare was not unavoidable. These conditions are the product of intentional policy decisions made by Democrats, over the objections of experts who warned exactly what would happen…. [Larry] Summers was one of the many mainstream economists who warned the Biden Administration what their policies would unleash. From the start, they tried to persuade Democrats not to ram through their historic glut of borrowing, printing, and spending. But Democrats didn’t listen. Back in the springtime, they used the pandemic as an excuse to pass a massive spending bill that the White House boasted was the most left-wing legislation in American history. Now families are paying the painful price. The country is deep in this hole that Democrats dug.” (Sen. McConnell, Remarks, 10/18/2021)

  • LEADER McCONNELL: “Summers was one of the many mainstream economists who warned the Biden Administration what their policies would unleash. From the start, they tried to persuade Democrats not to ram through their historic glut of borrowing, printing, and spending. But Democrats didn’t listen. Back in the springtime, they used the pandemic as an excuse to pass a massive spending bill that the White House boasted was the most left-wing legislation in American history. Now families are paying the painful price. The country is deep in this hole that Democrats dug…. Reckless liberal policies have dug America into a hole. Americans need Democrats need to stop digging deeper. But the response from my colleagues across the aisle is to trade in their shovels for an excavator. Democrats want to keep digging deeper. They want to try to inflate their way out of inflation. It makes no sense. It sounds as crazy as it is. No wonder this expensive socialist experiment is proving so painful.” (Sen. McConnell, Remarks, 10/18/2021)

SEN. JOE MANCHIN (D-WV): “Millions of jobs are open, supply chains are strained and unavoidable inflation taxes are draining workers’ hard-earned wages as the price of gasoline and groceries continues to climb. Senator Sanders’ answer is to throw more money on an already overheated economy while 52 other Senators have grave concerns about this approach. To be clear, again, Congress should proceed with caution on any additional spending …” (Sen. Manchin, @Sen_JoeManchin, Twitter, 10/15/2021)

 

‘Americans Are Likely To Face Higher Prices On Everything From Gasoline To Groceries Well Into Next Year’

“Americans are likely to face higher prices on everything from gasoline to groceries well into next year … [and] the inflation spike now appears to be on track to persist deep into 2022 … Evidence that higher costs might last longer than first expected has been piling up. Data on consumer prices released [last week] showed that the cost of goods and services rose 5.4 percent last month from a year earlier, the largest jump in 13 years. Prices increased 0.4 percent from August to September, the data showed, a higher-than-expected climb that was steeper than the month before. The Federal Reserve Bank of New York said [October 12th] that Americans’ short- and medium-term inflation expectations are at their highest levels since it launched the Survey of Consumer Expectations in 2013. And the International Monetary Fund noted ‘great uncertainty’ surrounding where inflation is headed in its World Economic Outlook this week and said the risk is that it could be worse than anticipated.” (“The Political Peril That Biden Didn’t See Coming,” Politico, 10/15/2021)

 

Goosed By ‘Government Stimulus Checks And Expanded Unemployment Benefits,’ ‘Rising Rents Are Fueling Inflation’

“[R]ents [are] shoot[ing] higher after a brief pandemic slump, burdening households and fueling overall inflation. That is bad news for the Federal Reserve, because it could make today’s uncomfortably rapid price gains last longer.” (“Rising Rents Are Fueling Inflation, Posing Trouble for the Fed,” The New York Times, 10/15/2021)

  • “Government stimulus checks and expanded unemployment benefits also helped people amass savings over the course of the pandemic, so they can afford to move. Personal savings as a share of disposable income popped during the crisis, and while the share has come down toward normal levels, it remains slightly elevated at 9.4 percent, compared with about 8 percent just before the pandemic. The combination of factors seems to have created a perfect storm that pushed the Consumer Price Index measure of rent up 0.5 percent just between August and September, the fastest pace in about 20 years.” (“Rising Rents Are Fueling Inflation, Posing Trouble for the Fed,” The New York Times, 10/15/2021)

“The national median rent has increased 16.4 percent since January, Apartment List said in its September rental report, with monthly growth slowing slightly from its July peak. ‘This is still very strong by historical standards — we’re in off season,’ said Igor Popov, chief economist at Apartment List. ‘It’s a racecar slowing down ahead of a turn, but it’s still going faster than we ever have in our lives.’” (“Rising Rents Are Fueling Inflation, Posing Trouble for the Fed,” The New York Times, 10/15/2021)

THE WALL STREET JOURNAL EDITORIAL BOARD: “The September [consumer price index] report also included omens of future inflation, notably the rise in housing costs. Actual rents rose 0.5% for the month, while owner-equivalent rents rose 0.4%. The latter is especially important because it makes up nearly a quarter of the CPI, and the increase in housing costs shows up in owner-equivalent rents with a lag. Housing costs have been soaring, with the Case-Shiller index up nearly 20% in a year as of July. This increase will flow into the CPI next year.” (Editorial, “The Inflation Tax Rises,” The Wall Street Journal, 10/13/2021)

 

‘Get Ready To Pay Sharply Higher Bills For Heating This Winter, Along With Seemingly Everything Else’

“Get ready to pay sharply higher bills for heating this winter, along with seemingly everything else. With prices surging worldwide for heating oil, natural gas and other fuels, the U.S. government said [October 13th] it expects households to see their heating bills jump as much as 54% compared to last winter. Nearly half the homes in the U.S. use natural gas for heat, and they could pay an average $746 this winter, 30% more than a year ago. Those in the Midwest could get particularly pinched, with bills up an estimated 49%, and this could be the most expensive winter for natural-gas heated homes since 2008-2009. The second-most used heating source for homes is electricity, making up 41% of the country, and those households could see a more modest 6% increase to $1,268. Homes using heating oil, which make up 4% of the country, could see a 43% increase — more than $500 — to $1,734. The sharpest increases are likely for homes that use propane, which account for 5% of U.S. households.” (“Winter Heating Bills Set To Jump As Inflation Hits Home,” The Associated Press, 10/13/2021)

  • “The forecast from the U.S. Energy Information Administration is the latest reminder of the higher inflation ripping across the global economy. Earlier Wednesday, the government released a separate report showing that prices were 5.4% higher for U.S. consumers in September than a year ago. That matches the hottest inflation rate since 2008, as a reawakening economy and snarled supply chains push up prices for everything from cars to groceries. The higher prices hit everyone, with pay raises for most workers so far failing to keep up with inflation. But they hurt low-income households in particular.” (“Winter Heating Bills Set To Jump As Inflation Hits Home,” The Associated Press, 10/13/2021)

“Natural gas in the United States, for example, has climbed to its highest price since 2014 and is up roughly 90% over the last year. The wholesale price of heating oil, meanwhile, has more than doubled in the last 12 months…. Heating oil prices … are tied closely to the price of crude oil, which has climbed more than 60% this year. Homes affected by those increases are primarily in the Northeast …” (“Winter Heating Bills Set To Jump As Inflation Hits Home,” The Associated Press, 10/13/2021)

‘This Is Going To Create Significant Hardship For People In The Bottom Third Of The Country’

“To make ends meet, families are cutting deeply. Nearly 22% of Americans had to reduce or forego expenses for basic necessities, such as medicine or food, to pay an energy bill in at least one of the last 12 months, according to a September survey by the U.S. Census Bureau. ‘This is going to create significant hardship for people in the bottom third of the country,’ said Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. ‘You can tell them to cut back and try to turn down the heat at night, but many low-income families already do that. Energy was already unaffordable to them.’ Many of those families are just now getting through a hot summer where they faced high air-conditioning bills.” (“Winter Heating Bills Set To Jump As Inflation Hits Home,” The Associated Press, 10/13/2021)

 

After Warning Earlier This Year That Massive Government Spending Risked Setting In Motion Significant Inflationary Pressures, Former Treasury Secretary Larry Summers Is Sounding Alarm Bells That ‘We Now Have A Gathering Storm Of Inflation’ And ‘We’re In More Danger Than We’ve Been During My Career Of Losing Control Of Inflation In The U.S.’

LARRY SUMMERS: “We’re in more danger than we’ve been during my career of losing control of inflation in the U.S.” (“Summers Slams Woke Fed for Risking Losing Control of Inflation”, Bloomberg, 10/13/2021)

HOST: “You’ve been warning on inflation risks since February. What’s your view on inflation now?”
LARRY SUMMERS: “I’m afraid things have come in worse than I expected on inflation. My view is, in February, was that we had a lot of demand coming down the pike that eventually the bathtub was going to overflow and we were going to have inflation because of the combination of fiscal and monetary policies and a big savings overhang. What has surprised me is how tight the labor market has become, how fast. How many supply side bottlenecks have returned and how rapidly inflation has accelerated. And that seems to be translated into increases in inflation expectations. Well, I think we now have a gathering storm of inflation and we’re likely to see some combination of that storm coming to fruition. Or the central bank being forced to act to contain inflation with potentially serious financial consequences or some combination of those two things. We’ve had labor market inflation. Wages at a seven and a half percent rate in the last month. We’ve had consumer price inflation close to a six percent rate over the last six months. We’ve had houses- housing price inflation at over twenty percent over the last year. Almost none of that has yet been reflected in the price indices. I think there are very serious reasons for concern.” (ABC Australia, 10/14/2021)

HOST: “Well given the supply shock problems we’re seeing do you see parallels in the global economy now with the 1970s?”
LARRY SUMMERS: “I actually see close parallels to the situation in the 1960s that set the stage for the 1970s. We have again got a very expansionary fiscal policy combined with loose monetary policy. We’ve again got a central bank that is heavily focused on social objectives rather than on avoiding inflation. We again have a country that is substantially fractured politically. We again have an idea that if we just stimulate demand we can solve most problems. And in the 60s we saw, before there were any adverse supply shocks, we saw inflation move from having a one handle in 1966 to having a six handle by 1969 and we’ve got much larger budget deficits today than we did then. We’ve got much more in the way of supply bottlenecks emerging much sooner than we did then. So I think we’re looking at a very serious kind of situation.” (ABC Australia, 10/14/2021)

FLASHBACK: In February, Larry Summers Warned That Spending From The Biden Stimulus Could ‘Set Off Inflationary Pressures Of A Kind We Have Not Seen In A Generation’

LARRY SUMMERS: “[T]here is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability…. [G]iven the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply. Stimulus measures of the magnitude contemplated are steps into the unknown.” (Larry Summers, Op-Ed, “The Biden Stimulus Is Admirably Ambitious. But It Brings Some Big Risks, Too.,” The Washington Post, 2/04/2021)

 

Even President Obama’s Former Top Economic Advisor Is Finally Admitting, ‘Higher Inflation Is Reasonably Likely Through At Least Next Year’ And Could ‘Take On Some Momentum Of Its Own’

JASON FURMAN, Former Obama Administration Council of Economic Advisors Chairman: “Higher inflation is reasonably likely through at least next year…. And once you’ve had two years in a row of higher inflation, it may take on some momentum of its own.” (“The Political Peril That Biden Didn’t See Coming,” Politico, 10/15/2021)

 

63% Of Americans ‘Say They Are Very Concerned About Rising Prices For Food And Consumer Goods’

“While substantial shares of Americans express concern about several economic issues … more say they are very concerned about rising prices than say this about other economic problems. A 63% majority say they are very concerned about rising prices for food and consumer goods (another 30% are somewhat concerned).” (“Biden Loses Ground With the Public on Issues, Personal Traits and Job Approval,” Pew Research Center, 9/23/2021)

Only A Quarter Of American Adults Think National Economic Conditions Are Good

“As the country continues to struggle with the coronavirus and its effects on public health and the economy, only about a quarter of U.S. adults (26%) rate national economic conditions positively. About three-quarters (74%) say current economic conditions are only fair or poor.” (“Biden Loses Ground With the Public on Issues, Personal Traits and Job Approval,” Pew Research Center, 9/23/2021)

  • “Today, Americans are less optimistic than they were in March that economic conditions in the country as a whole will improve over the next year. Just 29% of adults say they expect that economic conditions a year from now will be better than they are at present. This is lower than the share that said this in March (44%). Currently, about a third (34%) say the economy will be about the same, while 37% say that the economy will be worse a year from now. Positive expectations for the economy have declined among members of both parties.” (“Biden Loses Ground With the Public on Issues, Personal Traits and Job Approval,” Pew Research Center, 9/23/2021)

A Plurality Of Americans Say President Biden’s Policies ‘Have Made Economic Conditions Worse’

“About a quarter of Americans (26%) say that, since Biden took office, his policies have made the economy better, while 40% say they have made economic conditions worse; a third say they have not had much of an effect.” (“Biden Loses Ground With the Public on Issues, Personal Traits and Job Approval,” Pew Research Center, 9/23/2021)

 

###
SENATE REPUBLICAN COMMUNICATIONS CENTER

Related Issues: Inflation, Economy