What Republicans won't say and Democrats don't like to discuss about US
inflation
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[July 15, 2024] By
Howard Schneider
WASHINGTON (Reuters) - If the deep split in U.S. politics makes
characterizations of economic data a dependable tell about party
affiliation, the coming Republican and Democratic conventions will put
that phenomenon on steroids, amp it to 11, and leave little room for
shades of gray.
Republicans want things to seem bad and stoke sentiment against the
incumbent Democratic party.
Democrats want people to forget about the hardship high food and housing
costs have caused on their watch, and put sticker shock in the context
of rising wages or, on the blame side, corporate profits.
As the two parties make their case and nominate their candidates for the
Nov. 5 presidential vote, here are some of the things the Republicans
aren't likely to mention at their convention, and a few things the
Democrats would prefer people ignore during theirs:
INFLATION IS YESTERDAY'S NEWS
The Federal Reserve won't say it yet, but the spike in prices that
started in mid-2021 has largely subsided, inflation is approaching the
central bank's 2% targeted rate, and there are factors lining up that
are likely to pull inflation lower.
ABOUT THOSE CEREAL PRICES
At a July 9 hearing with Fed Chair Jerome Powell, Republican Senator
Steve Daines read off his shopping list of inflation complaints,
including that cereal prices had jumped more than 25% under Biden.
![](http://archives.lincolndailynews.com/2024/Jul/15/images/ads/current/ldn_booksda_CHASSKAREN_010924.png)
That is true.
He could also have said they have not increased at all over the past
year. Food prices overall have followed the same pattern, a punishing
level shift of about 20% from 2021 through 2023 and little change since.
As with much economic data, it matters when you start the clock, and how
you decide what's the trend and what's the outlier.
SHOPPING FOR A USED CAR?
Prices have fallen about 16% for used vehicles since February 2022, and
they are edging lower for new cars also.
After gummed-up computer chip and other supply chain problems caused
goods prices to surge beginning in mid-2020 - when COVID lockdowns and
fiscal transfers led to blowout spending on tangible stuff since
services like dining out and travel weren't accessible - prices for
goods are now behaving about how they did before the pandemic, staying
roughly stable or even falling a bit.
PEOPLE GOT BY
When asked why people seem so soured on the economy, Powell has often
said that even if price jumps are hard to swallow, people were still
spending money on trips and concerts and restaurants in a way that
seemed inconsistent with a narrative of struggling households.
Data from the Census Bureau's Household Pulse Survey in fact shows an
increase in households saying they found it "somewhat" or "very"
difficult to pay their expenses around the time inflation peaked in
2021. But the national average has since come down to below where it was
before the inflation surge.
In the Fed's 2023 Survey of Household Economics and Decisionmaking, the
share of those saying they were doing "at least okay" remained over 70%,
lower than the 78% peak hit in 2021, but roughly where it was before the
pandemic. By contrast, a dismal 22% rated the national economy "good" or
"excellent," a split between perceptions about personal conditions and
national ones that has flummoxed many economists.
![](http://archives.lincolndailynews.com/2024/Jul/15/images/ads/current/ldn_smallsda_BUSINESSMAG_2023.png)
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![](../images/071524PIX/busine66.jpg)
A person arranges groceries in El Progreso Market in the Mount
Pleasant neighborhood of Washington, D.C., U.S., August 19, 2022.
REUTERS/Sarah Silbiger/File Photo
![](http://archives.lincolndailynews.com/2024/Jul/15/images/ads/current/graue_lda_Buick4176_070824.jpg)
DEMOCRATS BEWARE: PRICES DON'T FALL
If the GOP will be stingy in acknowledging any improvement in
inflation, Democrats will try to downplay what two years of rapid
price increases have meant to people and how long it may take for
memories to fade.
Though prices of individual goods or services may fall, the price
level - the more general concept economists have in mind when they
talk of inflation - rarely goes down. Once price level jumps occur,
like the one just experienced, life stays more expensive. A cup of
coffee is never going to cost a nickel again, or even $2.
REAL WAGES DO
It is a standard talking point for Democrats that price increases
should be viewed in relation to the rapid wage increases seen
particularly for lower-paid jobs that were hard to fill in the
pandemic's wake.
But the purchasing power of wages did take a hit, even if the
lingering impact of some pandemic-era transfer programs masked it.
At the point where inflation hit its peak in the summer of 2022,
prices had gone up 12% since January 2021 while average hourly wages
had gone up around 8%.
The gap has narrowed since then, and for workers on production lines
or in non-management jobs the spending power of the average wage is
about where it was.
But that amounts to years of treading water, not getting ahead, and
overall hourly wages still lag.
LOW BLACK UNEMPLOYMENT; WIDE WEALTH GAP
The tight labor market exiting from the pandemic did, as the Biden
administration points out, help narrow the unemployment gap between
Black and white workers, and boosted incomes for Black families.
But a New York Fed study that looked beyond income to household
wealth, and adjusted it for inflation, found that one of the
Democratic Party's core constituencies had in fact gone backwards in
terms of net worth.
![](http://archives.lincolndailynews.com/2024/Jul/15/images/ads/current/peasley_sda_DARKLOGOGENERIC_070224.png)
It wasn't just a matter of not keeping pace. Black household wealth
was, once adjusted for inflation, actually lower as of the third
quarter of 2023 than it was at the start of 2019.
HOUSING WAS AND IS A SHOCK
How the U.S. ended up with a housing shortage is a story that starts
at least as far back as the collapse of the housing market in
2006-2007. Add to that the tightening of zoning laws in many states
and cities, people moving house during the work-at-home days of the
pandemic, the impact of high mortgage rates, perhaps even
immigration in some markets, and the result is a run-up in rents and
prices that may have gelled as a political issue on the Democrats'
watch. The fact that housing inflation has shown a glimmer of
slowing may not be enough to soothe voters as election day
approaches.
(Reporting by Howard Schneider; Editing by Dan Burns and Andrea
Ricci)
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