EPIC FAIL: Biden’s first year in office marred by worst annual inflation in four decades

02/11/2022 / By Nolan Barton

The U.S. consumer price index (CPI) increased by seven percent in 2021, marking the worst annual inflation in the country since 1982 and diminishing the purchasing power of worker paychecks. That fact alone is a clear indication that President Joe Biden’s first year in office is a massive failure.

There is no relief in sight either as the CPI climbed 0.6 percent in January from December last year. Compared with January of last year, consumer prices in the first month of 2022 are up 7.5 percent. Those numbers exceeded projections by economists, who expected prices to rise 0.4 percent on a monthly basis and 7.2 percent above the prices a year ago.

Inflation started to accelerate in March 2021 following years of coming in below the Federal Reserve’s two percent target.

The Fed had decided to keep interest rates low although the economy was recovering at a faster than expected rate. The Biden administration also pushed through billions of dollars of deficit spending in the American Rescue Plan. Those two factors combined to push up prices as they fueled demand for goods and services faster than supplies could expand. (Related: Economists warn $1.9 trillion Biden relief bill may trigger runaway inflation.)

Federal Reserve Chairman Jerome Powell initially claimed that inflation was due to transitory factors. Fed officials predicted that inflation would fall in the latter half of 2021, thinking that supply chains would swiftly untangle and a rebalancing of consumer demand from goods to services would relieve pricing pressure. Treasury Secretary Janet Yellen, on the other hand, continued to press for even more spending.

Mainstream media portrays surge in inflation as temporary

The mainstream media largely mimicked these views, portraying the surge in inflation as a temporary shift higher due to the reopening of the economy.

Interestingly, many news outlets claimed that former President Donald Trump’s tariffs would raise prices. But consumer prices remained low throughout his administration as tariffs ended up getting absorbed by Chinese producers and exporters and the profit margins of large U.S. companies.

Some of the same news outlets are now insisting that the price increases under Biden’s administration are no big deal. They say that a silver lining of inflation would be higher wages. However, prices have been rising faster than wages – lowering the standard of living for many American families.

Inflation continued to soar, sapping the credibility of the Biden administration and the central bank when it came to inflation. Late last year, Fed officials dropped the word “transitory” from their vocabulary and began signaling that they would raise interest rates this year.

Fed official: Inflation could persist beyond 2022

In October last year, Atlanta Federal Reserve President Raphael Bostic said the sharp increase in prices tied to the Wuhan coronavirus (COVID-19) pandemic has expanded beyond just a handful of major goods and will not wane anytime soon.

Bostic said at the time that he and his staff will no longer refer to the inflation as transitory because it could persist probably well into 2022 and beyond. He also pointed to worsening bottlenecks in supply chains, which is how businesses procure parts and supplies. Major shortages of many key materials have pushed prices higher, delayed production and forced businesses to charge more for their products.

The public’s perception of Biden’s competence has collapsed. Many Americans interpreted the administration’s confidence that inflation would pass to be a sign that it did not care about the hardships inflicted upon families paying more for food, fuel and other daily necessities.

Attempts by the administration to blame corporate greed for high prices fell flat. And despite announcing the biggest ever release of oil from the government’s emergency reserve, oil and gasoline prices continued to rise to the highest level in years.

The Fed is expected to raise its target interest rate in March. Fed watchers are debating how many times the Fed will hike rates, with swaps prices now implying at least three and perhaps four hikes this year. However, many analysts think the Fed will hike five to seven times this year as inflation proves less tractable than officials believed.

Biden’s approval rating falls as inflation rises

Polls show the public’s rating of Biden’s handling of the economy is at a record low. The president’s overall approval rating has plummeted. Forty-five percent of Americans say inflation has put a strain on household finances.

In December last year, a Fox Business poll showed that when it comes to rising prices, more than twice as many think the Biden administration’s actions are hurting rather than helping – 47 percent think they are hurting and only 22 percent think they are helping. (Related: Poll: American voters blame Biden’s policies for making inflation worse as approval dips.)

About 46 percent of poll participants also think Biden’s proposed social spending plan would push inflation higher, while 21 percent think it would help lower inflation.

That same survey revealed that more than eight in 10 Americans are extremely or very concerned about inflation. Also, about four in 10 say inflation is the biggest issue facing the economy – that’s more than double the number who say government spending or income inequality.