As anyone who regularly purchases the goods that sustain subsistence already knows, the Bureau of Labor Statistics revealed last Friday that inflation continued to intensify in May. Consumer prices are up by 8.6 percent from one year ago, the fastest rate of increase since December 1981.
The rising cost of daily life in the United States rose faster than the experts anticipated. Food costs increased by 1.2 percent in May. Shelter costs ballooned at the fastest pace since March 2004. Energy costs shot up by nearly 4 percent in that four-week span, while “fuel oil posted a 16.9% monthly gain, pushing the 12-month surge to 106.7%,” as CNBC reported. Wage growth is slowing. Even as more workers return to the labor force, some large employers are beginning to freeze hiring. The Federal Reserve is under increasing pressure to cool off the economy to restore price stability. Pursuing that mandate without inviting an economic downturn, however, looks less and less likely.
Inflation is everyone’s priority. A Quinnipiac University poll published last week found that, among registered voters, Americans’ reduced purchasing power is the most “urgent issue” for more than one-third of the electorate. At 16 percent, “gun violence” is the next most salient priority, and that is driven by the intensity of emotion around a succession of mass-shooting events that captured media’s attention. Barring similar, repeated episodes, the salience of gun violence as a political issue will fade while inflation’s exigency is only likely to grow.
To meet the demands of the moment, Americans are chewing into the personal savings that they accumulated over the course of the pandemic. A Northwestern Mutual analysis found last month that Americans’ personal savings declined by 15 percent in May, and the St. Louis Federal Reserve finds Americans’ rate of personal savings has declined to its lowest point since the fall of 2008. Today’s dire circumstances could fast become an existential emergency. The blame for Americans’ declining financial fortunes is likely to fall squarely on the party in power.
Yet, even as the conundrum of inflation grows ever more complex, President Joe Biden has leaned into a simplistic, monocausal rationale that explains away all of America’s financial woes.
“Today’s inflation report confirms what Americans already know,” Biden said in the wake of Friday’s devastating BLS report. “Putin’s price hike is hitting America hard.” He continued: “Gas prices at the pump, energy and food prices account for half of the monthly price increases since May. Inflation outside energy and food, what the economists call ‘core inflation,’ moderated the last two months. Not enough, but it’s moderated—it’s come down.”
It’s unclear what the president’s messaging on inflation is designed to achieve save for providing nervous Democrats with the flimsiest of talking points, which serve only to extricate the party from one awful news cycle at the expense of the next. The so-called core consumer price index, which excludes food and energy costs, did not “come down” in May. Though it may have peaked, this metric rose faster than estimates anticipated. Moreover, if costs for essential goods such as fuel and food are rising faster than the price of discretionary purchases such as consumer goods, who is breathing a sigh of relief? Finally, the idea that this can all be pinned on Vladimir Putin’s war of conquest in Ukraine is an insulting charade that even the White House doesn’t truly believe.
In the speech in which Biden blamed the Russian autocrat for Americans’ financial woes, the president also tore into fossil-fuel producers. “Exxon made more money than God last year,” Biden complained. “Exxon, start investing and start paying your taxes.” Well before Russian forces poured over the Ukrainian border, the administration warned that Americans could see energy costs rise by as much as 50 percent in 2022, and Energy Sec. Jennifer Granholm went about begging petroleum producers to increase production. The White House’s gimmicky efforts to reduce the price of gasoline—from increasing the amount of ethanol allowed in gas to releasing the Strategic Petroleum Reserves—have failed to arrest price increases.
“There is nothing Americans are more mad about than gas prices,” Harvard University economist Jason Furman recently told the Washington Post. “It’s one of the things the White House has very little power over. It’s a global price, and it’s driven by global events.” Indeed, the inelastic demand for fuel and its rising cost is a significant driver of cost increases across the board, and the conditions propelling its increase are multifarious. But there is plenty the White House would not do to relieve the pressure on Americans, as their actions attest.
As Biden’s speech affirmed, the White House will not drop its threats to impose punitive tax hikes on energy producers as punishment for the crime of making profits in an environment typified by high demand and low supply (a threat the administration bandied about for months prior to Putin’s invasion). They refuse to pare back executive orders aimed at curtailing fossil-fuel production and consumption: the suspension of drilling leases in the Arctic National Wildlife Refuge, a directive barring executive agencies from “subsidizing” fossil fuel producers, and pulling three new already scheduled offshore oil leases. The administration contends that these orders would not affect the price of energy in the short term. But energy is a futures market, and anything that signals new supply will be coming online—even a decade hence—would affect the way traders in the marketplace see their landscape.
The White House has taken some actions that could have an effect on energy prices, but the lethargy they’ve displayed in this pursuit is suggestive of their ideological myopia. In April, the White House eased a day-one executive order putting a stop to new leases for oil and gas exploration on federal lands. That’s a welcome, albeit unnecessarily delayed, maneuver. Similarly, the president has belatedly consented to drop his administration’s campaign to anathematize the Kingdom of Saudi Arabia and its crown prince, Mohammed bin Salman, and to grace Riyadh with a presidential visit. That seems to have been all it took to get the Kingdom-led OPEC+ cartel to ease its limits on oil production. The cartel announced on June 2 that it would hike production by about 50 percent in the coming weeks—an announcement that corresponded with the president’s decision to welcome Saudi Arabia in from the cold.
If the president’s “frustration” over his administration’s failure to message the problem of inflation away is boiling over, it’s only because inflation isn’t a messaging problem. Gas prices, and their contributions to overall cost increases, is not a Putin problem. They can try to pin the blame for Americans’ reduced purchasing power on the Kremlin, but the White House’s actions betray their dishonesty.