A new analysis of the inflation facing Americans under Joe Biden’s policies – a tank of gasoline already has surged past $100 – shows that the United States is now in “Jimmy Carter territory.”
Or the numbers would be if the feds hadn’t changed the way price increases are counted.
The report in the Daily Mail explains that on the surface, it looks reassuring for the present spiral of out-of-control prices.
“The headline inflation rate – the measure of total consumer inflation in the economy – peaked in March of 1980 at 14.8%. In May of 2022, headline inflation was 8.6%. On the surface, that comparison is reassuring. But is the comparison valid?” the report said.
It explained in 1983, the feds changed the way they figured inflation – “in ways that tend to understate inflation today…” The move included a discounting of the impact of home ownership on overall inflation measures.
That means inflation that produced the recent figures of 8.3% and 8.6% could have been worse than that.
Larry Summers, formerly Treasury Secretary of Bill Clinton, recently analyzed the hit on inflation by that formula change, made by the Bureau of Labor Statistics.
“Adjusting for that change alone, the Summers Report found that the headline inflation rate of 14.8% in March of 1980 would drop to 11.6%, only barely 3 percentage points higher than the current rate of 8.6%.”
And, the analysis said, the currently preferred inflation metric, known as core inflation because it excludes the price of energy and food, “would experience an even more significant adjustment.”
The report said core inflation clocked in at a peak of 12.5% in March 1980 but would only have been 6.7% by today’s standards. For comparison, in March 2022 the post-pandemic core inflation rate peaked at 6.5%.
Explained the analysis, “This suggests that if we were to evaluate today’s inflation numbers in the same way that we calculated inflation in the 1980s – we’d already be squarely in Jimmy Carter territory.”
The analysis was by Andy Puzder, former CEO of CKE Restaurants and a senior fellow at the America First Policy Institute, and Jim Talent, former senator from the state of Missouri.
They noted the Commerce Department’s latest claim about inflation shows prices for goods and services are 6.3% higher now that a year ago.
The Federal Reserve already has been surging interest rates in an attempt to take the steam out of inflation’s rise.
The report said, “Economist John Williams estimates the inflation number today would be about 16% if it were calculated as it was in the Carter years.”
They added, “With respect to goods that consumers are actually buying, the American Institute of Economic Research provides an estimate of consumer costs for a basket of ‘everyday’ items—eliminating from consideration infrequently purchased items or contractually fixed items (i.e., vehicles, furniture, and leases). This Everyday Price Index (EPI) is averaging 20.6% annualized so far in 2022.”
They point out that Paul Volcker, chairman of the Federal Reserve from 1979 to 1987, “had to raise interest rates to 20% to tame inflation” back then.
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