A new inflation number, a new headache for Biden - Africa News Quick
  • July 13, 2021

A new inflation number, a new headache for Biden

U.S. consumer prices spiked again in June, extending the highest inflation rate in 13 years and emerging as a political threat to President Biden’s big-spending infrastructure proposals ahead of the midterm elections. of the next year.

The Labor Department reported Tuesday that consumer prices rose 0.9% in June from May and 5.4% last year, the highest increase in 12-month inflation since August 2008. Core inflation, excluding food and fuel prices, increased 4.5% in the past. year, the largest increase since September 1991.

The number was once again well above the expectations of private economists and Republicans have begun to label the higher cost of gasoline, groceries and other necessities as “Joe Biden’s hidden tax on Americans.”

The persistent rise in prices complicates the trillion-dollar infrastructure initiatives of Biden, who has promised that rising inflation is a temporary response as the post-COVID economy returns to service. But Republicans showed Tuesday that the consumer crisis is becoming a campaign issue in the 2022 election.

Senate Minority Leader Mitch McConnell said the administration and Congressional Democrats were warned by economists earlier this year that “overspending and overspending would trigger inflation, delay rehiring, and hurt small businesses. “

But the Kentucky Republican said Democrats “rushed in” with a $ 1.9 trillion pandemic aid package, and now want to continue with about $ 4 trillion in two more spending plans. Democrats aim to pass one of those packages, calling for more money for social programs like paid leave and expanded childcare assistance, through “reconciliation” budget rules to avoid Republican obstructionism.

“What Democrats say they want to accomplish this summer through reconciliation would make our current inflationary mess look like little potatoes,” McConnell said in the Senate. “No one seriously thinks that our country needs another gigantic overdose of excessive indebtedness, overspending and excessive taxes. And this is not what the American people voted for either. “

But Senate Budget Committee Chairman Bernard Sanders, an independent from Vermont, said after meeting with Biden on Monday that he is still pushing for $ 6 trillion in new spending.

“A large majority of the members of the Democratic caucus want to get as big as possible,” Sanders said.

White House deputy press secretary Karine Jean-Pierre said Tuesday that Biden’s proposal to raise taxes to pay for part of the plan, which deals with new roads and bridges, is “reasonable and responsible.”

Republican lawmakers who have returned from their districts over the July 4 holiday say they have heard complaints from voters about higher prices and shortages.

“Families are paying more for everything they need to survive and it is a direct consequence of [the] House Democrats’ decision to spend trillions of taxpayer dollars on pork, pet projects, and pay people not to work, ”said Calvin Moore, spokesman for the Congressional Leadership Fund, a super PAC that supports House Republicans. “The Democrats took over Washington, and all the American people did was raise living costs, raise unemployment rates, and increase crime rates.”

Even some Democrats also express concern about the pace of inflation, warning that Biden’s ambitious spending plans threaten to overheat the economy.

“Recent wage increases will mean nothing to workers if inflation intensifies,” tweeted former Obama administration economic adviser Steven Rattner.

The White House on Tuesday pointed to rising business optimism as proof that Biden’s economic plan is working, citing a survey by the National Federation of Independent Business.

“As President Biden controls the pandemic, more small businesses are in a position to fully reopen, rehire, raise wages and rebuild,” the White House said. “In the months before I took office, small business optimism was slipping and the economy was in turmoil. Thanks to President Biden’s leadership, a strong vaccination campaign and a historic aid package, optimism has risen by nearly 8 percent since January and the economy is now creating more than 600,000 jobs on average each month. “

Democrats also cite what they call the hypocrisy of Republicans warning of government spending and rising deficits after rarely citing those issues under former President Trump.

Sending checks

The inflation data came just as the administration’s expanded Child Tax Credit begins to hit the bank accounts of millions of parents.

“While President Biden and the Democrats are delivering, each and every Republican in Congress worked tirelessly to prevent critical aid from reaching these families and their children by voting against this relief after a challenging year,” he said. the Democratic National Committee.

Stocks fell modestly on Tuesday on hotter-than-expected inflation news, which moderated a strong start to the second-quarter earnings season. Investors worry that rising inflation could lead the Federal Reserve to raise interest rates earlier than expected, which could threaten the recovery.

However, Fed officials have repeatedly said that they view rising inflation as a temporary response to tight supply and other short-term disruptions as the economy recovers rapidly.

Used car and truck prices soared 10.5% since May, the largest monthly increase of its kind since record-keeping began in January 1953. That increase accounted for about a third of the monthly increase. for the third consecutive month.

The cost of airfare and clothing also rose sharply in June.

The jump in prices is due in many cases to the shortage of components and goods throughout the economy, from semiconductors to used cars, as well as the increasing demand of consumers who travel more and more, shop and eat out, and very few workers to serve them. As a result, wages have risen sharply, along with restaurant meals, airfare, and hotel fees.

Hotel room prices soared 7% in June. And the cost of new cars rose 2%, the biggest monthly increase since May 1981. Car prices have soared as a shortage of semiconductors has forced automakers to cut production.

Restaurant prices rose 0.7% in June and 4.2% last year, a sign that many companies are raising prices to offset higher labor costs.

Mister. McConnell and other Republicans blame the Democrats’ policies.

“I just spent two weeks listening to my colleagues in Kentucky and they are already paying a very high price,” McConnell said. Manufacturers are still absolutely battered by supply chain disruptions. Employers large and small say the Democrats’ special bonus for workers staying at Families, he said, “is felt everywhere, from the grocery store to the gas station to the home to the used car lot. And beyond.”

“All thanks, in large part, to the Democrats’ half-spending spree since the spring,” McConnell said. “And now they want an even more absurd and damaging summer sequel.”

The Senate Republican National Committee, the campaign arm of Republican Senate candidates, said voters should remember the impact of Democrats’ policies “every time they open their wallets to pay more for the goods they need.”

“The Democrats have outsourced their economic agenda to the Socialists and the result has been the highest inflation rates in decades,” said TW Arrighi, a spokesman for the NRSC. Sadly, it appears that relief may be delayed as Senate Democrats come up with new and worse spending proposals. If they don’t wake up soon, voters will wake them up by handing Republicans a solid majority in Congress in 2022. “

So far, investors have largely accepted the Fed’s belief that higher inflation will be short-lived, and bond yields indicate that concerns about inflation on Wall Street are fading. Bond investors now expect inflation to average 2.4% over the next five years, up from 2.7% in mid-May.

Long-term views of Americans on inflation have also stabilized. A survey by the Federal Reserve Bank of New York, released Monday, found that consumers expect inflation to remain near 5% within a year. But they expect inflation to be 3.5% three years from now, slightly below last month. Consumers often overestimate future inflation.

The public’s inflation expectations are important because they can be met on their own. If consumers anticipate higher prices, they are likely to demand higher wages and companies will try to charge more to offset their higher costs.

The Fed is targeting inflation to exceed its 2% target for some time to make up for the fact that inflation fell below that level for most of the last decade. The Fed wants inflation to average 2% over time to prevent Americans’ inflation expectations from falling too low.

This story is based in part on cable service reports.

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