Biden called inflation 'temporary' a year ago — but prices are still hitting new highs
Inflation rages higher on one-year anniversary of Biden calling it 'temporary'
Economist warns 'widespread' inflation growing throughout all parts of economy
Former Treasury Department economist David Beckworth analyzes the pace of inflation and the risk of global recession on 'Varney & Co.'
President Biden tried to assuage voter fears about inflation exactly one year ago by insisting that an increase in prices was expected to be temporary and likely to fade as his administration invested more in infrastructure and worked to clear supply chain disruptions.
"We also know that as our economy has come roaring back, we’ve seen some price increases," Biden said in remarks on July 19, 2021. "Some folks have raised worries that this could be a sign of persistent inflation. But that’s not our view. Our experts believe and the data shows that most of the price increases we’ve seen are – were expected and expected to be temporary."
At the time, inflation had just surged by 5.4% from the previous year, according to a government report published on July 13. White House officials maintained that soaring costs stemmed from pandemic-induced disruptions in the economy, including pent-up consumer demand and disruptions in the supply chain, and that prices would fall as the economy normalized.
"I want to be clear: my administration understands that were we ever to experience unchecked inflation in the long term, that would pose a real challenge for our economy," Biden said. "While we're confident that isn't what we're seeing today, we're going to remain vigilant about any response that is needed."
WHY IS INFLATION STILL SO HIGH, AND WHEN WILL IT START TO COOL?
President Biden speaks with reporters before boarding Air Force One at Los Angeles International Airport after attending the Summit of the Americas, Saturday, June 11, 2022, in Los Angeles. (AP Photo/Evan Vucci / AP Newsroom)
But in the 12 months since then, inflation has marched steadily higher with no evidence of a coming slowdown: A scorching-hot Labor Department report released last week showed the consumer price index rose 9.1% in June from a year ago, exceeding market expectations. It marks the fastest pace of inflation since December 1981.
In an even more alarming development, so-called core prices, which exclude more volatile measurements of food and energy, climbed 5.9% from the previous year. Core prices also rose 0.7% on a monthly basis — higher than in April and May — suggesting that inflation is becoming increasingly sticky as it broadens throughout the economy.
Experts say it could take some time for inflation to begin to cool off — and even then, that doesn't mean prices are going to fall for consumers.
"The idea that we're going to be back anywhere near 2% inflation rate in the near term is fanciable," RSM chief economist Joe Brusuelas told FOX Business. "It’s going to be a hard, long slog. A lot of heavy lifting on the part of the Fed. And they're going to clearly risk triggering a recession to restore price stability."
Rampant inflation and the rapid dissolution of Americans' buying power have become major political liabilities for Biden ahead of the November midterm elections, in which Democrats are expected to lose their already razor-thin majorities. Surveys show that Americans see inflation as the biggest problem facing the country – and that many households blame Biden for the price spike.
The president has sought to make battling inflation his top priority, blaming higher prices on greedy corporations, supply chain bottlenecks and other pandemic-induced disruptions in the economy, as well as the Russian war in Ukraine. Most economists now agree that unprecedented levels of government stimulus and a stronger-than-expected recovery from the pandemic have also played at least some role in exacerbating the price spike.
In a statement after the most recent inflation data release, Biden acknowledged that inflation is "unacceptably high" and called tackling it his "top priority." But he suggested the data is "out-of-date," arguing that record-high gas prices are to blame for the ugly CPI reading — and noted that prices at the pump have since subsided.
People shop for produce at a store in Rosemead, California on June 28, 2022. (FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
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"While today’s headline inflation reading is unacceptably high, it is also out-of-date," Biden said. "Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June. Those savings are providing important breathing room for American families."