While it’s quite true that year-over-year inflation is cooling as the Fed has slammed on the brakes, and it’s also the case that people are working as the unemployment rate is low – what the Bidens don’t seem to understand is that their economic polls are hovering in the 30s because average working folks are losing affordability on a daily basis.
You may have a job – which is great – but after inflation your take-home pay has gone down 26 of the past 29 months. So, you may have to take a second job. In fact, each spouse in the family may have to take a second job just to get by. What’s the problem here?
The level of prices has risen significantly in the past two years – from Biden’s frenzied government spending, his war on fossil fuels and the Fed’s money-printing up until recently. For example, think of this: the level of the consumer price index is up 16% since February 2021. Day-to-day necessities like groceries are up 19%.
Gasoline at $3.85 is up about 40%. It was about $2.35 a couple years ago. Meats, poultry and fish up 19%. New cars up 20% if you can get one. Used autos up 34%. You go down the list and you can see that these outsized price hikes take a real toll on traditional family life.
Overall real wages are down about 3%. The average family is spending over $700 a month more for everyday purchases than they were two years ago. With mortgage rates now running upwards of 7.5%, housing affordability is the worst since 1997, according to my friend Liz Peek and, according to House Speaker Kevin McCarthy, who will be here in a moment, the reality of back-to-school under Bidenomics is very expensive.
Pens, markers and mechanical pencils cost 13% more today. Binders and folders cost 48.5% more than they did last year. Crayons and highlighters are up an average of 18.5% over the past year.
So, when my friend Jared Bernstein, chair of the Council of Economic Advisers, says that questions about inflation have gone “stale,” he’s really missing the point. Affordability is different than inflation. The causality may be similar, namely excess spending and money creation. The reality though is that individual prices can be family killers.
The other point worth making is that despite a softer inflation rate recently, especially compared to the gigantic inflation a year ago, the overall problem of rising prices has not yet been solved and I want to make one more point.
Last week, I spoke with former President Donald Trump about the need for supply-side policies like lower taxes and regulations and a lid on federal spending, but Mr. Trump’s first love is something he calls “liquid gold.” That refers to our vast energy resources, including oil and gas.
Liquid gold affects literally hundreds of prices throughout our economy. The obvious one is gasoline. Open up those spigots, reignite production, and hundreds of business and family-oriented prices will go back down to where they were several years ago. That will conquer family inflation, and all the other ‘flations’ you can think of.
This article is adapted from Larry Kudlow’s opening commentary on the August 22, 2023, edition of “Kudlow.”