American humorist Edgar Wilson Nye famously observed, “Wagner’s music is better than it sounds.” Recently, the White House and its numerous allies in the “news” media have been telling an increasingly skeptical electorate a similarly self-refuting tale about the Biden economy. Typical of the stories that have appeared in major news outlets is this howler from CNN’s Julian Zelizer, who insists that there is “a huge disconnect between the economic data and the way voters are feeling.” Anyone naïve enough to believe such balderdash will be disabused of their illusions by reading Friday’s Bureau of Labor Statistics report showing that the consumer price index (CPI) has risen by 6.8 percent during the 12-month period ending in November.
This is the largest 12-month increase in the CPI since 1982, and it is hitting Americans where it hurts most — the cost of energy, food, and transportation. This suggests that there is indeed a “huge disconnect,” but that it is between the fiscal fantasies of the Biden administration and the financial realities faced by the voters. Unfortunately for the White House, inflation isn’t as susceptible to spin as are most issues debated inside the Beltway. Americans encounter the truth every time they pay their heating bills, fill up their gas tanks, and buy food. Friday’s report merely confirms what they see in their daily lives. The worst news involves how much more they now spend on energy than they paid last year:
The energy index rose 33.3 percent over the past 12 months with all major energy component indexes increasing sharply. The gasoline index rose 58.1 percent over the last year, its largest 12-month increase since the period ending April 1980. The index for natural gas rose 25.1 percent over the last 12 months, and the electricity index rose 6.5 percent.
The bad news on food prices was slightly less alarming:
The food at home index rose 6.4 percent over the past 12 months, the largest 12-month increase since the period ending December 2008. The index for meats, poultry, fish, and eggs increased 12.8 percent, with the index for beef rising 20.9 percent. The index for dairy and related products posted the smallest increase, rising 1.6 percent over the last 12 months.
The price of everything else spiraled upward as well:
The index for all items less food and energy rose 4.9 percent over the past 12 months, its largest 12-month increase since the period ending June 1991. The index for used cars and trucks rose 31.4 percent over the last 12 months, and the index for new vehicles rose 11.1 percent. The shelter index rose 3.8 percent, the largest 12-month increase since the period ending June 2007.
President Biden responded to this hair-raising report with a statement that highlights his tenuous grasp on basic economics. He called on Congress to “pass my Build Back Better plan, which lowers how much families pay for health care, prescription drugs, child care, and more.” In reality, of course, passage of BBB would increase inflationary pressure throughout the economy. The nonpartisan Congressional Budget Office projects that BBB would, absent the fiscal gimmickry inserted by the Democrats, “increase the deficit by $3 trillion over the 2022–2031 period.” Passing this awful bill in order to reduce inflation would be roughly comparable to putting out a house fire by spraying it with kerosene.
No one escapes Economics 101 without hearing inflation defined as “too many dollars chasing too few goods.” BBB, if passed by Congress and signed into law, will verify that old saw with a vengeance. It will dump $3 trillion on a stagnant supply chain and drive the CPI into double digits. If this seems implausible, don’t forget that the inflation rate during former President Carter’s last year in office was 13.5 percent. Ironically, there is considerable historical evidence that, if the White House and Congress can resist yet another federal spending spree, the pandemic itself may well slow inflation down. A recent Commentary article points out a study of epidemics that suggests they tend to be deflationary:
Using data going back to the 14th century, covering six European countries and 19 pandemics, the authors find that such events have historically caused inflation to fall for more than a decade, on average, yielding an inflation rate about 0.6 percentage points lower than if the pandemic had not occurred. The more prolonged and severe the outbreak, the more pronounced and persistent the negative effects on trend inflation.
But can the Democrats control themselves? It’s conceivable that Friday’s report will be enough to convince moderates like Sen. Joe Manchin (D-W.Va.) to vote against BBB. Manchin has long expressed concerns about the bill’s potential inflationary effects, particularly since last month’s unnerving CPI numbers were released: “By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.” Manchin is a slim reed to lean on, of course, but he isn’t the only Democratic senator with qualms.
It has been widely reported that White House officials have been briefing newsrooms in order to reshape the gloomy narrative that dominates their coverage of the economy. This betrays a stunning level of contempt for the voters — even by the cynical standards of the Biden administration. The belief that an increase in media happy talk will distract voters from steadily rising prices suggests that our president and his advisers believe the electorate is made up of idiots. But a new ABC/Ipsos poll indicates that 69 percent of Americans disapprove of Biden’s handling of inflation. The voters know that Biden’s economic policies are as bad as they feel, and they’ll say so at the ballot box in 2022 and 2024.