Why are voters more focused on inflation than President Biden?

Three years of data is your answer!

Dear Readers,

I haven’t written about inflation in a while, and am happy to report that the pace of CPI increases is lower than before. This is my ninth post on inflation in the past year, though I am happy to report that David Henderson won our bet with his position that annual CPI increases would stay below 10.0 in all of the monthly reports for 2022 (including January 2023), so I’ll happily buy him lunch the next time we meet. Heck, losing the bet actually saved me money, too!

When the latest figures were released a week ago, the NY Times reported, “Consumer Price Index inflation has been slowing compared with a year ago…” That theme of slowing inflation has been tricky, and we need to keep banging the drum that slowing inflation is a kind of illusion. What I mean by that is when monthly reports of annual inflation follow the pattern of the past six months (8.9% in June 2022, 7.8% in October, and now 6.3% in January 2023), the reporting always neglects the longer term. So, yeah, annual inflation hasn’t gone into double digits. But net inflation has.

In January 2021, prices overall were 1.4% higher than the January before. Exactly a year later, the CPI in January 2022 was 7.5% higher. This January, prices rose an additional 6.3%. The thing that everyday Americans notice is that a steady inflation rate in the 6-8 percent range means that prices are 12-16 percent higher over TWO years. What about THREE years? The historical record indicates that the inflation genie burst out of his bottle in April of 2021. If prices keep rising at the so-called slow rate, then we are looking at a net price increase of around 23% and counting in early 2024 … the election home stretch.

The story in a chart is right here. The pundits keep talking about the dotted red line — annual inflation — and I am telling you that the real story is the thick black line —longer-term inflation. Prices are 16.0 percent higher today than three years ago, and almost all of that increase happened in the past two years.

Everyday Americans are getting hammered by higher prices, and they don’t think political leaders are paying attention. Consider recent polling from Harvard-Harris, which found the #1 issue voters felt President Biden should have given more attention to in his State of the Union address is “Inflation and prices” (#2 was The economy). When asked to assess the believability of dozens of statements in the speech, voters thought the least believable two things Biden said were “Food prices are coming down from their peak” and “Inflation has fallen every month for the last six months.”

Ironically, Biden was dead right. Inflation has declined. But prices haven’t. The president is not going to get credit for fighting inflation in November 2024, even if the rest of the economy is performing well, unless he makes credible policy changes to hold prices steady — in the 1-2 percent range. He may not get there, but my sense is that voters don’t think he is really trying to get there, not when his administration refuses to even negotiate a path to reducing deficits. Instead, he’s playing the spin game as if record deficits are lower by cynically measuring against the 2020 pandemic-year federal budget. That kind of argument may be applauded by your base, but it isn’t fooling anyone.

My advice: You want to be honestly right, not dead right.

Podcast Postscript. You can listen to my podcast with David Henderson here, and the new podcast with David Urban (CNN pundit, 2016 Trump strategist, and all-around great American) here — we had a blast talking about how to improve the presidential primary debate process if and when Dave becomes the head of the RNC. Look for more podcasts coming out on Mondays in March.