The Realities Of Life In A Not So “Transitory” Inflationary Spiral

WASHINGTON, DC, Dec 17 — Gee, that’s funny.  It doesn’t feel “transitory.” People are hurting, and President Biden says, hang in there, I’ll get this pesky, temporary inflation under control.  Meanwhile, the statistics and the polls show that Americans are suffering from an inflationary spiral, the likes of which has not been seen in decades — with no end in sight.

Meanwhile, Biden’s own Treasury Secretary, Janet Yellen, and his Federal Reserve Chairman, Jerome H. Powell, warn that we’re not going to be out of the woods for quite some time to come.  Contradicting her boss, Ms. Yellen states flatly that, “I am ready to retire the word transitory.” And Mr. Powell says, “The risk of higher inflation becoming entrenched has certainly increased. I don’t think it’s high at this moment, but I think it’s increased.”

Just last week, the Bureau of Labor Statistics [BLS] issued a report showing that the Consumer Price Index [CPI]] currently stands at 6.8%– a level that has not been seen for four decades.  The CPI confirms the fact that everything from the gas you put in your car to family meals cost more, much more, in the Biden era.

And then, there is the Producer Price Index [PPI], which measures the selling prices received by domestic producers for their output.  The Bureau of Labor Statistics reports that the PPI “rose 9.6 percent for the 12 months ended in November, the largest advance since 12-month data were first calculated in November 2010.”

Putting all of these statistics into context is a Gallup Poll conducted earlier this month.  It shows that:

• 45% of Americans report financial hardship triggered by increased prices
• 10% describe the hardship as threatening their current standard of living
• Seven in 10 lower-income Americans experiencing hardship

Gallup concluded that the inflation we are experiencing is anything but “transitory,” as our president would have you believe. Its report made it clear that “Rising prices are expected to persist, meaning more Americans are likely to report hardship, and those most vulnerable are likely to see things get worse before they improve.”

So, who hurts the most in this new era of inflammatory inflation?  The younger you are, the less likely you are to feel the pain, and so you say to yourself: this, too, shall pass.  But the older you are, inflation takes its toll.  It can have a disastrously measurable impact on your remaining years.  It eats at the nest egg you’ve put away.  It even has a potentially devastating impact on your Social Security income.

According to the Investopedia Website, “In terms of the actual amount of money that inflation can cost retirees, the numbers are startling. LIMRA Secure Retirement Institute constructed a model demonstrating the effect inflation could have on the average Social Security benefit over a period of 20 years. According to its research, a 1% inflation rate could swallow up $34,406 of retirees’ benefits. If the inflation rate were to increase to 3%, the shortfall would total more than $117,000.” Bear in mind that the CPI is currently reporting a 6.8% inflation rate.

Similarly, inflation increases the cost of living for low-wage earners.  Dana M. Peterson, chief economist at The Conference Board, says it is not a passing impediment for them; it will have repercussions for many years to come. “To understand why, imagine a family earning less than the median wage of about $58,600 a year, pre-tax. Their after-tax income is even smaller, leaving less room for spending. Using data from the Bureau of Labor Statistics (BLS) 2019 Consumer Expenditure Survey, my own calculations reveal that families earning $50,000 or less annually, on average, spend anywhere from 110% to 340% of their after-tax income on rent, food and utilities each year. This means that many of these families are borrowing just to make ends meet.”