OPINION: This article may contain commentary which reflects the author's opinion.
A new study has found that inflation during the Biden era is eating into American household income, hitting the lowest-earning workers the hardest.
According to a new study by the Wharton School at the University of Pennsylvania, so-called “Bidenflation” is costing low-wage households 7 percent more while higher earners are paying around 6 percent more in costs.
“We estimate that inflation in 2021 will require the average U.S. household to spend around $3,500 more in 2021 to achieve the same level of consumption of goods and services as in recent previous years (2019 or 2020),” says a summary of the study released this week.
“Moreover, we estimate that lower-income households spend more of their budget on goods and services that have been more impacted by inflation. Lower-income households will have to spend about 7 percent more while higher-income households will have to spend about 6 percent more,” the study said.
The study findings stem from near-historic rises in the consumer and producer price indices which have risen substantially throughout Biden’s first year in office.
Another month of rising prices under Biden:
Gas: +58.1% since last year
Bacon: +21%
Eggs: +8%
Steak: +24.6%
Propane & Firewood: +34.3%
Furniture: 11.8%
Used Cars & Trucks: +31.4%
Coffee: +7.5%
Cigarettes: +9.4%
Hotels & Motels: +25.5%
Car & Truck Rentals: +37.2%
Bikes: +9.4%— Jacki Kotkiewicz (@jackikotkiewicz) December 10, 2021
The study adds:
…[B]ecause of variation in the composition of consumption bundles, we find that higher-income households had smaller percentage increases in their total expenditure. Higher-income households spent relatively more on services, which experienced the smallest price increases. On the other hand, lower-income households spent relatively more on energy whose prices had large increases. Under the fixed 2019 bundle assumption, the bottom 90 percent saw their consumption expenditure go up by between 6.7 percent to 6.9 percent in 2021.
“Since higher-income groups had a bigger increase in expenditures in all categories, they also saw a bigger increase in total expenditure,” the study notes. “However, because of variation in the composition of consumption bundles, we find that higher-income households had smaller percentage increases in their total expenditure.”
The Wharton study comes as more Americans are feeling increasingly anxious about the U.S. economy — and as most blame President Biden.
And even some Democrats are warning the president and his party that continuing along the same economic policy path is a political loser because Americans won’t put up with it.
Lawrence Summers, who served as Clinton’s secretary of the Treasury and one of Obama’s top economic advisers, reacted earlier this week to the Biden Labor Department report that the Consumer Price Index “rose 6.8% for the 12 months ending in October, the largest 12-month increase since the period ending June 1982.”
“I cannot understand why so many in Admin & out cling to the idea that inflation is caused by bottlenecks & will soon recede to normal levels. Of course there is uncertainty but the idea that inflation will revert soon to levels anywhere near Fed’s target looks like a long shot,” Summers said in a Twitter thread.
“Nonpartisan BLS CPI report refers to inflation as ‘broad increases in most sectors…similar to last month.’ Inflation is not @ bottlenecks. Less than 10% of index saw inflation below 3% & aside from housing where figures are problematic, the share below 4% is less than quarter,” he added.
“We have all seen house prices & rents soar. Home prices based on Case Shiller are up 15 to 20%, as are rental prices, as reported by the nation’s largest landlords. If we assume 17% residential inflation, both CPI and core CPI would have exceeded 10 percent last month,” he wrote.
“Either the official indices are just wrong or more likely 3 to 4 points of inflation from housing are coming in 2022, even if there is no further increase in rents or home prices. This effect far exceeds any benefit from lower energy or used car prices,” he added.
“We are beyond where the Vietnam inflation took us but still have plenty of time to stop a late 1970s situation from developing if we have the will,” he concluded.