Inflation soared 7.5% over the past 12 months, the steepest spike since 1982, further eroding worker wage gains and posing deepening election-year peril for Democrats.
The rise in the Consumer Price Index included a jump in food prices of 0.9% in January, compared with a 0.5% increase in December, the Labor Department said Thursday. Price increases covered a broad range of goods and services, including food, rent and utilities.
Excluding often-volatile food and energy costs, prices increased by 6% from January 2021 to January 2022, also the largest increase since President Reagan’s first term. It is the third straight month of inflation hitting 40-year highs, and forecasters said there are few signs that it will ease anytime soon.
The persistently rising inflation is another worrying sign for congressional Democrats and President Biden, who have been trying to reassure consumers that prices will drop in this midterm election year as the economy gets past COVID-19 disruptions and global supply chain problems ease.
Mr. Biden, who promised last summer that inflation would be temporary, said Thursday that rising prices are causing “real stress” for families. Still, he insisted that there are “signs that we will make it through this challenge” and that economic growth rates are up and unemployment rates are down.
“While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022,” the president said in a statement.
SEE ALSO: Survey: 66% of small business owners say Biden is accelerating inflation
But the administration has been surprised before, and the January CPI numbers, including a monthly inflation rate of 0.6%, we’re worse than economists expected. A Bloomberg survey of economists projected the annual rate in January would be 7.2%
Republicans, joined by Democratic swing vote Sen. Joe Manchin III of West Virginia, pounced on the numbers to renew their accusation that the high inflation rates — which are worse in the U.S. than in most other developed countries — were caused by Democrats’ excessive government spending last year to fight the COVID-19 pandemic.
“America has it worse than almost everybody else in the developed world,” said Senate Minority Leader Mitch McConnell, Kentucky Republican. “That is a direct result of liberal policy choices. The severity of this inflation was directly fueled by the reckless, far-left spending spree that every single Democrat in this chamber voted to ram through at President Biden’s behest last year.”
Only Brazil and Turkey had higher inflation rates than the U.S. from the third quarter of 2019 to the third quarter of 2021, according to a Pew Research Center study late last year. Inflation in France was negligible, while Japan, China and India had negative inflation, or falling prices.
Mr. Manchin criticized the White House and fellow Democrats on Thursday for wanting to spend “trillions more of taxpayers’ money” as inflation soars.
Mr. Manchin, whose opposition has slowed or stalled much of Mr. Biden’s domestic spending agenda, said it is time for lawmakers to begin taking the inflation threat seriously.
SEE ALSO: Manchin urges Democrats to nix Trump tax cuts to cool skyrocketing inflation
“It’s causing real and severe economic pain that can no longer be ignored,” Mr. Manchin said. “It’s beyond time for the Federal Reserve to tackle this issue head-on, and Congress and the administration must proceed with caution before adding more fuel to an economy already on fire. As inflation and our $30 trillion in national debt continue a historic climb, only in Washington, D.C., do people seem to think that spending trillions more of taxpayers’ money will cure our problems, let alone inflation.”
Waiting on the Fed
The Federal Reserve is widely expected to make its first interest rate hike in seven years in March. The move will be aimed at cooling the economy and moderating prices. More rate increases are expected throughout the year.
U.S. Treasury yields climbed Thursday, with the benchmark 10-year rate breaching the 2% level for the first time since August 2019. The move was driven by investors’ expectations of faster rate hikes by the Fed to try to contain the hotter inflation.
Rising interest rates will raise borrowing costs for consumers on items such as auto loans, credit cards and home mortgages.
The inflation report was the first measure of prices this year, and it posed a fresh threat to vulnerable Democratic incumbents who were already facing a difficult midterm election year, when the president’s party historically loses seats.
Democratic Rep. Abigail Spanberger hosted the president on a visit to her swing district in Northern Virginia on Thursday and said inflation is among the “laundry list of concerns” from her constituents.
“There’s not one singular cause of inflation,” she said. “There’s not going to be one singular solution. When you’re worried about the gas pump or you’re worried about the cost of chicken in the grocery store, and your child is diabetic — all those things become impactful.”
At the event in Culpeper, Mr. Biden proposed limiting the costs of prescription drugs by imposing a “steep” tax on drug companies whose prices rise faster than the inflation rate. The president also called on Congress to pass hundred-billion-dollar portions of his failed Build Back Better bill to provide more aid for child care and other services that families are struggling to afford.
“Inflation is up,” the president said. “But the fact is that, if we’re able to do the things I’m talking about here, it’ll bring down the costs for average families.”
Mr. Biden acknowledged that food prices are higher.
“We’re working to bring them down,” he said. “I’m going to work like the devil to bring gas prices down. … I’m working to make sure that we keep strengthening the supply chains to bring the cost of energy and everything else and the goods that come to America down by helping the ports 24/7.”
He blamed the pandemic for causing chronic shortages, closed ports and rising prices. He said Congress can provide more help until those problems subside.
“You still have to pay for child care. Child care is a cost for millions of families,” the president said. “You still have to pay your prescription drug prices. You still have to pay for health care. You want to lower the cost of living for people? Help them in those areas. There’s more than one way for a family when it comes to raising their standard of living.”
No mere brush fire
Steve Moore, an economic adviser in the Trump administration and co-founder of the Committee to Unleash Prosperity, said” ‘Bidenflation’ is no longer a transitory brush fire, but a fast-spreading forest fire of rising prices.
“With wages up 4.6% and prices up 7.5%, the purchasing power of Americans’ paychecks have shrunk by almost 3% in one year under Biden,” Mr. Moore said in a statement. “The solution: stop government spending, borrowing, and printing of money. Start by burying Build Back Better.”
Rep. Kevin Brady of Texas, the top Republican on the tax-writing House Ways and Means Committee, called the report “more bad news for working families.”
“Months after President Biden claimed inflation peaked, it’s now the highest in 40 years,” Mr. Brady said. “As a result, last year working families paid an additional $5,000 in higher prices and higher taxes — a huge pay cut under the Biden administration.”
He said under Mr. Biden’s leadership, the U.S. “is on the verge of, if not already in, a crippling wage-price spiral that will end badly for families, small businesses and the U.S. economy.”
“But he’s doing nothing about it, and his Build Back Better bill would make it worse,” he said.
Mr. Biden offered no new solutions but said his administration “will continue to be all hands on deck to win this fight.”
“We will continue to rebuild our infrastructure and manufacturing so we can make more in America and strengthen our supply chains here at home,” he said. “We will continue to fight for costs in areas that have held back families and working people for decades, from prescription drugs to child care and elder care to their energy costs. And we will continue to promote more competition to make our markets more competitive and give consumers more choices.”
• Haris Alic contributed to this report.
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