"Prices at the wholesale level accelerated further in April, part of a broader inflation problem persisting through the U.S. economy, the Bureau of Labor Statistics reported Thursday. The producer price index, which tracks how much manufacturers get for products at their initial sale," rose "11% from a year ago," reports CNBC. "Those numbers came the day after the BLS reported that consumer prices for goods and services in the marketplace rose 8.3% from a year ago...indicative of the worst inflation the U.S. has seen since the early 1980s."
"Gas and groceries have been responsible for much of the inflation surge, with indexes tracking the two sectors up a respective 1.7% and 1.5% in April, according to the PPI data. Auto prices, particularly for used vehicles, also have been a major inflation component, and the PPI index for motor vehicles and equipment increased 0.8% on the month."
While prices are going up, people's savings are shrinking. Their savings accounts are earning interest rates of less than 1%, which fails to keep pace with an inflation rate of over 8%. Effectively, people's savings accounts are losing 7% of their value each year.
This reflected a weak economy: the U.S. economy shrank at a rate of 1.4% in the most recent quarter, reflecting a huge rise in America’s trade deficit. American exports decreased by 9.6%, while imports grew by 17.7%. U.S. productivity dropped at a 7.5% annual rate, the most since 1947.
Inflation is higher in America than it is in Europe. Under Trump, the U.S. economy outperformed Europe, especially during the pandemic year of 2020, when Britain, France and Italy experienced much sharper economic declines than the U.S. The U.S. economy shrank 3.5% in 2020. The economy shrank much more in Europe: 7.9% in France, 9.9% in the United Kingdom, and 8.9% in Italy.
But that has changed under Biden. While America’s economy was shrinking recently, France’s economy was growing in 2022, and France’s inflation rate is lower than America’s. A finance professor describes the current era in the U.S. as “The Biden stagflation,” combining high inflation with economic stagnation.
Biden’s policies caused inflation, according to even Democratic economists like Larry Summers and Obama advisor Steven Rattner. As Rattner noted in the New York Times, Biden has spent “an unprecedented amount” of taxpayer money, which resulted in “too much money chasing too few goods.”
To deal with the high inflation of the Biden era, Senator Majority Leader Chuck Schumer (D-NY) suggested a tax increase. But raising taxes would also likely shrink the economy and deepen the coming recession that many economists predict.
The economy is already hampered by Biden Administration policies that discourage work, reward idleness, and make it harder for companies to attract employees. Biden enacted policies that reduced the size of America’s private-sector workforce and made America less economically competitive.
Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department.