The U.S. Bureau of Labor Statistics reported on Thursday that the consumer price index rose 0.4% in September, showing that inflation remained at a near four-decade high of 8.2%.
“Today’s report shows some progress in the fight against higher prices, even as we have more work to do. Inflation over the last three months has averaged 2%, at an annualized rate,” President Joe Biden said in a statement.
EJ Antoni, a research fellow for regional economics in the Center for Data Analysis at The Heritage Foundation, couldn’t disagree more.
“This is just the latest example of how Americans are being absolutely crushed right now by these higher prices. And it’s not yachts and caviar that are driving these increases. It’s necessities. It’s the basic staples,” Antoni says.
“It’s eggs, bread, milk. We’re not talking about filet mignon here. We’re talking about ground beef. And sadly, Americans are really paying the price for what has been going on the last two years in terms of the government just spending, borrowing, and printing trillions and trillions of dollars,” says Antoni.
Antoni joins “The Daily Signal Podcast” to take a deeper dive into what the consumer price index means, how it compares to the producer price index, and even offer some spending advice ahead of the holiday season.
Listen to the podcast below or read the lightly edited transcript:
Samantha Aschieris: Joining the podcast today is EJ Antoni. He’s a research fellow in regional economics in the Center for Data Analysis here at The Heritage Foundation. EJ, thanks so much for joining.
EJ Antoni: Samantha, thank you for having me.
Aschieris: Of course. Now, let’s just dive right in. The consumer price index number came out Thursday morning. It showed an increase of 0.4% in September and 8.2% since last year. Kick us off here. Break this number down for us.
Antoni: Sure. I mean, this is just the latest example of how Americans are being absolutely crushed right now by these higher prices. And it’s not yachts and caviar that are driving these increases. It’s necessities. It’s the basic staples. It’s eggs, bread, milk. We’re not talking about filet mignon here. We’re talking about ground beef.
And sadly, Americans are really paying the price for what has been going on the last two years in terms of the government just spending, borrowing, and printing trillions and trillions of dollars.
Aschieris: And did we see any sort of relief from this number? Were there any index decreases, basically?
Antoni: No. None of the major categories went down, sadly.
And one of the things that has been keeping the index down the last several months has been the drop in gasoline prices. But now that we’re going into the winter and there’s going to be an increased demand for things like home heating oil, for example, and the fact that we now have OPEC decreasing production, and at the same time, the Biden administration won’t let domestic producers increase our own production, all of this is going to come together to mean higher energy prices.
And so the one thing that has really been keeping the index in check, more or less, is now going to be let loose as well.
Aschieris: Yeah. It’s only October and I’ve already had to put the heat on. So, I’m not looking forward to this winter.
Something I also wanted to ask you about was the producer price inflation number that also came out this week. It came out on Wednesday. It showed an increase of 0.4%. Now, how do these two numbers compare?
Antoni: Sure. The producer price index measures the prices that businesses are having to pay, whereas the consumer price index is going to measure the prices that you and I have to pay. And what happens is that over time, these numbers tend to track together. And the reason for that is because as costs increase for businesses, they pass those costs on to consumers.
And what we’ve seen during the Biden administration is that those costs for businesses have actually increased substantially more than the costs for consumers. In fact, the producer price index, the PPI, has been higher than the CPI every single month of the Biden administration in terms of those year-over-year changes.
So that means there are already tremendous price increases basically baked into the cake in the economy right now, so that even if prices for businesses were to magically flatline, which obviously isn’t going to happen, but even if it did, there’s going to be continued cost increases that will be passed on to consumers in the months ahead. So, unfortunately, there’s no relief there, either.
Aschieris: Yeah. And it was interesting because President [Joe] Biden talked about the CPI number in a statement that the White House put out. He talked about that it showed some progress in the fight against higher prices, even as we have more work to do. Something that we had talked about before the interview was the core consumer price index increase. What’s the difference between just the consumer price index versus the core consumer price index?
Antoni: The core consumer price index is going to exclude food and energy. And you may say, “Why on Earth would you want to exclude those things, because everybody needs food and energy?” And that’s true. But food and energy prices are notoriously volatile. So, when you exclude those, you can get a better sense of what the overall price level is doing.
And over time, sure enough, both the CPI and the core CPI tend to track together. One may be a little higher or a little lower, but over time, it all averages out.
Well, we’ve seen energy increase so fast for the last two years that we haven’t really had enough time yet for all of those costs to fully trickle down into other parts of the economy.
For example, the price of diesel fuel has been through the roof, which means that truckers are having to charge more and railroads are having to charge more for transporting literally everything you get off a store shelf. And so now, those costs are being passed on in earnest to consumers at all levels of the economy.
And now, core CPI has hit a 40-year high, just like the headline CPI number has been hitting 40-year highs.
Aschieris: Yeah. I want to talk about that a little bit more. Do you anticipate these numbers to continue to get worse or do you think we’ve seen the worst?
Antoni: Well, just like CPI really hasn’t caught up to PPI, also, the core CPI has not caught up to CPI. In other words, we still have a lot of food and energy costs that are going to trickle down everywhere else in the economy. So, no. Unfortunately, I really don’t see any signs of relief for the consumer.
Aschieris: I want to shift a little bit to some other concerns that Americans are feeling, and they’re facing a recession. Earlier this week, President Biden was in an interview with CNN’s Jake Tapper. He said that he didn’t anticipate a recession, but even if there was one, it would be basically a slight recession. First and foremost, what indicates a recession? And are we in one already?
Antoni: Certainly. When we talk about recession, we’re talking about the economy contracting. And it’s actually not uncommon for economic activity to decline for a single month or even a single quarter, a three-month period. In certain cases, it actually happens routinely every single year.
For example, if you want to go from December to January, the economy always contracts because all of that retail activity that’s concentrated around the holidays goes away. Employment goes down. And so we seasonally adjust for all these different factors. In other words, we try to take out all of the seasonally predictable factors that go into the economy.
So, what we’re left with at the end is an answer to the question of, what would this month or this quarter look like if it had happened any other time of the year? Even with all that taken into account, the first half of the year, not just a month, not just a quarter, but two quarters in a row, six months, the economy contracted. So, we’ve already had the recession.
At this point, it’s not a question of, are we going to have a recession? It’s, are we going to have a double dip? In other words, the third quarter looks like it’s going to be positive. But then after that, all bets are off because everything that I see is pointing to continued decline.
Aschieris: Now, as we head into the holiday season, as you just mentioned, what should consumers, what should Americans be aware of this holiday season?
Antoni: Oh, wow. That’s a good question. One of the things that Americans are going to increasingly need to be aware of is the cost of financing debt. What I mean by that is interest rates continue to rise.
To put into perspective how much of an additional cost this is causing consumers, if you look at the median-priced home when Biden took office and compare that to the median-priced home today, the mortgage on that has gone up about 80%.
I mean, it’s just absolutely devastating. People can’t afford homes anymore. And sure enough, the Atlanta Federal Reserve’s home affordability index is down over 30% because of that.
In terms of, again, that median-priced home, if you add up all your mortgage payments over the course of a year, they’ve increased by about $10,000 a year because of a combination of the price of the home going up and the interest rate now doubling in literally a matter of months.
But it’s not just homes. It’s going to be credit cards. It’s going to be student loans, auto loans. All kinds of debt are getting more and more expensive.
As tempting as it may be when you’re doing your holiday shopping, for example, to splurge, remember how much more it’s going to cost you in terms of trying to pay off that credit card.
Aschieris: Yeah. It’s going to be a crazy holiday season, for sure.
One final question for you, and it might seem like a pretty big ask. But if you could do anything, in your opinion, what is the No. 1 thing that you would suggest or advise the Biden administration to do to reverse the course that the country’s headed on in terms of the economy right now?
Antoni: Balance the budget immediately. Right now, as the Federal Reserve is hiking up these interest rates—and as we just said, that’s causing a tremendous amount of harm to Americans, they would not need to hike the rates nearly as hard or as fast if we had a balanced budget.
But right now, we have a Congress and president that are working at cross purposes to the Fed. And the more they spend and the more they borrow, the more the Fed has to slam on the brakes. And so if they—they being the Congress and the president—could stop the reckless spending and borrowing, then that would solve a tremendous amount of our problems and have an incredibly positive impact on bringing down inflation.
Aschieris: Well, EJ, thank you so much for joining the show today. I really appreciate you taking the time to provide some insight. Thank you so much.
Antoni: Samantha, thank you for having me.
Have an opinion about this article? To sound off, please email letters@DailySignal.com and we’ll consider publishing your edited remarks in our regular “We Hear You” feature. Remember to include the url or headline of the article plus your name and town and/or state.
The post Economist Explains Why ‘Americans Are Being Absolutely Crushed Right Now’ appeared first on The Daily Signal.
- As GOP Investigative Committees Commence, Maybe Leftists Will Finally Relocate - October 15, 2022
- Biden Plays the Old Ugly American - October 14, 2022
- My Love-Hate Relationship With Twitter - October 14, 2022
New Right Network depends on your support. Donate now