Inflation numbers for October 2020 to October 2021 came in at a staggering 6.2%. Much of that increase, of course, has occurred under this current administration. That number is up dramatically from the 2% inflation rate that was recorded from October 2019 to October 2020 during the Trump Administration.
For many years, including during the Obama and Bush II years, inflation hovered around 2-3%. That was always the target the Federal Reserve set as their goal to keep the economy humming without it overheating and causing inflation.
If you really want to see how dramatically inflation decreases your buying power, go on the internet and find an inflation calculator. It will show you if you purchased an item for a certain amount (in a year that you input) it will tell you what that same item would cost in today’s dollars.
For example, and I’m dating myself here, but in 1979 there was a very popular television show called “The White Shadow.” The plot was about a white, former NBA bench player who, after he retires, is talked (by an old friend) into coaching basketball at an inner-city Los Angeles High School.
His old friend was the school’s principal. Some of the players on the team wore Nike sneakers. Nike was not as well known as they are today and I had never heard of the shoe brand before. My peers and I used to get our sneakers from Sears (Winner Twos) for about seven or eight bucks.
After seeing the players with Nike sneakers on, I just had to have a pair. So I dragged my mom to the Footlocker at the mall and showed her the pair I wanted. They were a pair of low-top white Nike’s with the black swoosh.
My mom looked at the price tag of $40 dollars and said, “Boy, are you out of your mind! I’m not paying $40 for a pair of tennis shoes that you’re going to outgrow in a few months.” We could have easily afforded the shoes but it was just inconceivable to her that a pair of sneakers would cost so much.
Much later in life, of course, I used an inflation calculator to see what those $40 sneakers would cost in today’s money. I redid the calculation this morning and those 1979, $40 sneakers in today’s money would cost $152.39.
That works out to a cumulative inflation rate of 281%! That put it all in perspective for me years later. I was asking my mother to purchase a still growing seventh-grader a $152 pair of sneakers!
Now let’s fast forward to yesterday’s testimony by Fed Chairman Jerome Powell before the Senate Banking Committee. For months, he and the Administration have been saying the inflation the economy is experiencing is “transitory” or temporary. They’ve kept saying that prices have continued to rise as demand exceeds supply. Powell abruptly changed his tune yesterday, though:
“I do think that the threat of persistently higher inflation has grown. … But clearly, the risk of more persistent inflation has risen. So, I think the word transitory has different meanings to different people. To many, it carries a time – a sense of short lived. We tend to use [the word transitory] to mean that it won’t leave a permanent mark in the form of higher inflation. I think it’s probably a good time to retire that word and try to explain more clearly what we mean.”
TRANSLATION: “The American people are no longer believing higher prices are temporary and good times and lower prices are right around the corner. They’re not stupid and we need to level with them like adults.” Steve Rattner, former Obama Administration Treasury official, said as much last month in a New York Times Op-Ed:
“[I]nflation worries are top of voters’ minds. So the [Biden] administration should come clean with voters about the impact of its spending plans on inflation. Build Back Better can be deemed “paid for” only if one embraces budget gimmicks, like assuming that some of the most important initiatives will be allowed to expire in just a few years.”
The Consumer Confidence Index fell in November to its lowest level in nine months due to inflation worries. It has now dropped four out of the last five months. This is a bad omen for the Administration. There are many similarities between the Carter Administration and this current administration including rampant inflation.
Poor leadership and the Iranian hostage crisis were factors in Carter’s defeat to Reagan, but another big factor was rising inflation. Let’s continue to hope that inflation worries also result in the demise of the Biden Administration in 2024.