From Dean Baker:
I know people say the rationing was the pandemic, but guess what folks, so was the inflation of 2021-2022. It was a worldwide story. That point is too complicated for Donald Trump, but not for most voters.
— Dean Baker (@DeanBaker13) December 5, 2023
Unfortunately, I think this is too complicated for most voters. They've heard a million times that inflation was Joe Biden's fault because of his stimulus bill, and that's what they believe even if it makes no sense.
Bought gas today at <$3.00/gallon!
You forgot to add "Thank you Joe Biden!"
Several gas pumps I see in Denver used to feature stickers of Biden pointing at the per-gallon price and a speech balloon that said “I did that!” They disappeared as the prices dropped significantly.
I blame Mr. Drum for spending too much money on trips and camera equipment. I’d like to see a chart of his spending over the last 10 years.
Not to pick on Mr. Drum, but he’s a stand in for many 10s of millions of upper middle class people who went on a spending binge and drove demand for junk. If only they had exercised a little restraint and self control, this whole mess could have been avoided.
“While some of this spending reflects the rising cost of necessities, Americans are also still buying big-ticket items and laying out tons of cash for experiences. This "YOLO" attitude towards money bucks the spending trends of past economic downturns – and some economists have been left scratching their heads, especially as consumer sentiment on the economy remains overwhelmingly pessimistic. "If 18 months ago, you'd have said the Federal Reserve Bank could raise interest rates by 500 basis points, and the consumer would chug on, relatively unfazed, I would have been extremely surprised," says Ellie Henderson, an economist at UK-based, global bank Investec. "I'd have said, 'that's just not how economics works'."
https://www.bbc.com/worklife/article/20231130-why-americans-yolo-spending-attitude-baffles-economists
Not to pick on Mr. Drum, but he’s a stand in for many 10s of millions of upper middle class people who went on a spending binge and drove demand for junk. If only they had exercised a little restraint and self control, this whole mess could have been avoided.
It's simply not true that the 21-22 inflation was being driven by excess demand. Take a look at the graph for money velocity between Q2 of 2020 and now (https://fred.stlouisfed.org/graph/fredgraph.png?g=1cdZa). It craters in the first months of the pandemic, then gets a slight goose from the stimulus package (A good thing! That spending saved us from a major recession!), and then stays flat for two years before starting to inch up last year again to roughly where we were before the pandemic.
The inflation was caused by labor and supply chain disruptions that affected the whole world, not just the US. Full stop. Those issues have mostly cleared up now and inflation has not completely returned to its normal, pre-pandemic rate, but almost. Prices for a lot of stuff are still high because producers and retailers found that people were still willing to pay them, and so have not rolled them back as fast as they might otherwise have. You can tell this because corporate profits are near their all-time highs (https://www.statista.com/statistics/222127/quarterly-corporate-profits-in-the-us/#:~:text=Corporations%20in%20the%20United%20States,and%20Product%20Accounts%20(NIPA).)
I would say the inflation experienced was due to three things: the stimulus, supply chain issues, and corporate hustling. But that really isn't the question, is it? The question is, how much of each of these three factors contribute to inflation?
Given the data and the benefit of council much wiser than I in these matters, I would hazard to guess that of the three, the stimulus was the least important. Read Krugman 😉
I think I'm going to start using that one every time a certain well-known troll attention-posts.
You should also add a full-scale war between two major oil and grain producers.
"This "YOLO" attitude towards money bucks the spending trends of past economic downturns..."
Can you really call it an economic downturn if unemployment is really low, wages are rising, and consumers are buying?
Without bad faith ….
Republicans would have no arguments at all
This is simply self-deception: "They've heard a million times that inflation was Joe Biden's fault because of his stimulus bill, and that's what they believe even if it makes no sense."
It not only makes sense it is without doubt true that the stimulus bills contributed to inflation. See in fact Krugman.
This is not to say the stimulus spending were wrong headed to endeavour, they were a legitimate bet to take, but the did have consequences. The Left would lose some of their bad reputation in the area of economic management if they spent less time in denialism and more time on a pivot - talking solving inflation and the like.
From a policy perspective a reasonable bet but it is self-harm to deny the over-shoot and continuous self-harm to be blind to the reputational ding - from which your recovery is not going to successfully built either on denialism and poo-pooing nor silly awkward eggheads copy-cat slogans like Bidenomics, the nerd kids trying too hard.
"The Left would lose some of their bad reputation in the area of economic management if they spent less time in denialism " Agreed.
And the Right would lose some of their bad reputation in literally any financial area if they would remove the heads from their asses.
Don't know why I'm responding to a known troll whose obviously trolling, but: Read. The. Headline. What does it say? Here, I'll put it into this comment: "Inflation is all Joe Biden’s fault" (emphasis mine). Do you not understand the difference between words like 'all' and 'not'.
Spare us the rest of your inane babblings about Krugman; most of us have subsriptions to the NYT, or at least, read his column. And Krugman does not -- repeat, does not -- say that inflation is all Biden's fault.
Stupid troll.
Ah the childish Person on Internet Who Disagrees with me is a Troll blithering on.
Leaving aside the childish idiot tantrum of Known Troll name calling let me attempt to mitigate your impoverished reading comprehension skills by drawing attention to the fact I was quoting directly from Drum - and here to address your impoverished reading skills, let me quote again: ""They've heard a million times that inflation was Joe Biden's fault because of his stimulus bill, and that's what they believe even if it makes no sense."
-- Headlines are not the quote nor the observation in question. One really should try some joined up reading development to address that confusion.
The comment was in specific response to specific statement of Drum. And in respect to indeed Lefty denialism (one should add into this knee-jerk lashing out and defensiveness, queerly misplaced given my observation was approving of the policy choice Biden made (as indeed I have consistently made over the past two years - queer form of trolling that) as a reasonable bet, with only the critique as I have consistenlty made that the Lefty side reaction has been bungled politically with foolish denialism, defensive posturing and unconvincing Bohemian Bourgeousie-splaining)
"Krugman does not ... say that inflation is all Biden's fault." Indeed he does not and neither did I say he did nor state nor imply all his fault, although you have enthusiastically knocked down that strawman.
However it is not, contra Drum, unfounded nor incoherent to draw some fault to the stimulus spending.
Ansering scentofviolets is waste of time. Just don't bother.
It is not, according to drum, either founded in reality or coherent to blame all the fault on stimulus reading. Now let's get down to the actual quote: They've heard a million times that inflation was Joe Biden's fault because of his stimulus bill, and that's what they believe even if it makes no sense. Wow, sure looks like an 'all' to me there. Hands up: How many people think that Drum m'seant that millions of people believed inflation was solely Biden's fault? Okay, now how many people think that Drum meant that millions of people believed inflation was partially. Biden's fault? Yeah, that's what I thought. You lose again. I could go on with other takedowns of your buffoonery, but what would be the point?
Dumbass.
There was supposed to be a blockquote in there, but I think most people understand what I meant. Most people, but by know means all 😉
I will state this yet again: one cannot attribute any inflationary effect to ‘stimulus’ spending, without considering the replacement ratio (for income lost to unemployment, reduced hours, business closures). I haven’t found quite the right data; this link is suggestive but not definitive: https://www.pewresearch.org/race-ethnicity/2023/12/04/wealth-surged-in-the-pandemic-but-debt-endures-for-poorer-black-and-hispanic-families/
Consumption actually declined during the pandemic, while savings increased, so it wasn’t the classic case of ‘too much money chasing too few goods’. That may have happened later, as people spent savings down. What’s lacking in the Pew data is comparison to trends, and area-under-the-curve.
Here is something from the CEPR. And here is the money quote:
I don't know how accurate this statement is, or indeed if you consider the CEPR even remotely reputable, but that's the quickest source I could find.
You did see the graph? The US is the world's economic elephant so US policy decisions necessarily have some effect on other countries, but the post-covid inflation is a worldwide phenomenon, and is essentially simultaneous over many countries. It didn't happen first in the US ands later in the other countries, so US policy is likely not a significant contributor.
It is incredibly dishonest to say that 'inflation is Joe Bidens fault' is the same thing as 'The stimulus bills passed by the Trump and Biden administration contributed to inflation'.
Highly dishonest.
Also, your main point is a ridiculous way of framing economic policy or inflation.
You are to blame for any inflation if you do not actively try to throw the economy into a depression at all times.
Just a silly way to think about it. That similar inflation occurred in places without similar stimulus measures never seems to enter into the narrative.
But thats because, as always, your point isnt really the topic at hand.....instead the topic just serves as an excuse to yell at THE LEFT! This is the only thing that matters.
Carry on with the silliness.
When your 'The Left' encompasses Dwight Eisenhower you've got bigger issues than your online credibility. Someone on Mother Jones once told me he's not even British, go figure.
I wonder if Dean Baker has a grocery budget. I mean an actual can't-spend-more-than-this budget, not just some hip life hack budget. Based on bank statements I pay $242 more a month on average on the same groceries. I suspect other people do as well if not more. Lots of those people are gonna blame the current leadership.
$242 per month more than what ? What you spend in 2019 ? 2021 ? 1999 ?
I do the weekly shopping for my family. There was undeniably a big rise in prices during and after the pandemic but over the past year not so much.
And yet, you still get enough calories in your diet to be able to type comments to blog posts, so hopefully you're not living on a bus stop bench at the moment. Did your income go up at all between January 2021 when Biden took office and today, to offset some or all of the $242 more per month that you're spending on food? Have you mentally adjusted for that, or are food prices never supposed to ever go up in your lifetime? (If the latter is the case, someone owes me a massive refund, because all food prices today are higher than when I was born in 1977... and started shopping for myself in 1995...)
Try eating all your meals at Domino's. They offer a medium carryout pizza with 2 toppings for $5.99 where I live... enough to feed me for 2 meals. $3 a meal is pretty affordable, and somehow has survived inflation, since I remember ordering it at the start of the pandemic at that price too.
What is a “hip life hack budget”?
Sounds like something that maybe I should look into!
Did anyone dispute that there was inflation?
I agree with those like Lounsbury that the stimulus spending of 2021 (and don't forget 2020 when Trump was President) contributed to the inflation of the past couple years but it's not clear to me just how much. But that said, our media reports inflation in the most sky is falling breathless tone possible. Consider this:
https://www.cnbc.com/2023/11/15/thanksgiving-dinner-turkey-is-cheaper-this-year.html
In an article about Thanksgiving dinners being CHEAPER this year, this is the opening line:
"Food inflation has been on a tear, with prices for food at home up 2.1% year-over-year in October, according to the consumer price index."
Food prices are on a tear when when they are 2.1 % higher than a year ago ? That $100 grocery bill is $102 this year . Raise the alarms !
Of course the stimulus added to inflation. How could it not? It's basic economics. It was exactly the right policy, but inflation was one inevitable result.
How could it not? If it only replaced business and personal income lost during the pandemic, from layoffs, business closures, reduced hours, that’s how. The Pew data I cited above was that it more than offset the losses, but much of the stimulus was saved, or used to reduce debt, not spent; therefore not contributing to inflation. Not enough data there to be sure of the net.
Krugman at one point said inflationary pressures from the stimulus turned out to be 'modest'. I don't know whether that predates your PEW source or updates it.
So you have the same amount of money chasing a reduced amount of goods and services, and you can't see why that would result in inflation?
I'm impressed that the stimulus package contributed to worldwide inflation.
Two reactions to this.
1) "They've heard a million times that inflation was Joe Biden's fault because of his stimulus bill, and that's what they believe even if it makes no sense."
I think this overstates how much people pay attention to commentary about inflation. Public opinion on the economy is mostly "I do/don't like the economy right now, so I do/don't like the President right now."
If the media had never once assigned blame for inflation to Joe Biden, I doubt we'd see very much difference in public opinion. When the economy is good, most normal people give the president credit. When the economy is bad (or even just *feels* bad), most normal people blame the president. The media pays a much smaller role than the quote above suggests.
I doubt the average person on the street could even tell you that Joe Biden passed a stimulus bill in March 2021. But the average person knows things are more expensive than they used to be, and they know Joe Biden is President. That's enough.
2) Inflation is a global phenomenon and it is clear that we would have seen inflation even absent any changes in US policy.
But!
The US inflation rate rose faster and peaked earlier than our peers. Then it fell faster too. We started experiencing inflation sooner and then got it (mostly) under control earlier. This suggests we did something different.
It's definitely not *proof* that the stimulus bill made inflation worse. But it is *consistent* with that theory.
These things are complicated and there's a lot going on under the hood. That being said, I think you posted the chart to prove that the ARP didn't cause inflation - but that chart seems consistent with the idea ARP made inflation come sooner.
The "coming down faster" bit seems mostly to do with energy prices in Europe after the invasion of Ukraine. After the US, the next two lowest inflation rates are Canada and France. France mostly doesn't use Russian gas (they leaned heavily into nuclear power), which would explain why they are the best of the European countries in your chart, and obviously Canada also doesn't use Russian gas.
You ae overlooking "greedflation". There was an interesting article in Kos a little while ago about a price fixing conspiracy by a couple of major egg producers that resulted in significant price rises. The producers publicly blamed it on drops in production due to avian flu. In their less publicized statements to shareholders and others they were boasting of huge profits AND SELLING MORE EGGS than ever before. They were also saying that there was no evidence of flu in any of their "laying facilities". I can't find it in Kos anymore, but I did find an article about it in Insurancejournal.com. Egg buyers were awarded damages of $53 million.
I'm not sure I follow your comment. Are you saying businesses in the US are greedier than businesses in other countries?
Nope. I'm saying that in this case, these egg producers conspired to fix prices and lied about avian flu causing a shortage of eggs. They generated a panic, used the panic to both greatly increase prices AND sell a lot more eggs because no avian flu had hit their facilities. It was so blatant that the egg BUYERS sued them for overcharging and the court ruled for the buyers.
Thus, we have an inflationary influence that had absolutely nothing to do with the stimulus OR supply chain constraints. Consumers saw inflation, the egg producers saw large profit increases. Not sure how much the lying to buyers about egg supplies while bragging to shareholders and their industry associations about making out like (ahem) bandits, but the court assessed actual damages (KOS article) then tripled them to get to the $53M, so obviously they were NOT amused. Oh yeah - the original conspiracy to fix prices supposedly started in the 90s. But they were initially modest about it - then they went wild.
I've been reading a fair number of articles about similar warning flags - companies raising prices dramatically - and getting big boosts in profits. It's not proof of price gouging, but when int's happening over a lot of industries, a good epidemiologist would start taking notice...
He clearly didnt say that, poor attempt at a misdirection.
Something to consider is that a businesses ability to set prices is not the same across all countries.
Competition, regulations, etc....
This is completely wrong.
The inflation graphs being slightly different DOES NOT imply that the US DID something to cause this slight difference. It certainly doesnt imply that a piece of legislation caused this slight difference.
You are simply assuming your conclusion.
"But the average person knows things are more expensive than they used to be, and they know Joe Biden is President. That's enough."
This is why democracy is a bad idea.
It's famously the worst form of government...except for all the others.
"The best argument against democracy is a five-minute conversation with the average voter"
-- Winston Churchill (apocryphally)
The polling indicates that virtually all Republicans and a small majority of Democrats think the economy is not good. Clearly, this hurts Biden's favorability.
Articles claiming that folks are wrong on the economy, while compelling in terms of data, likely don't move public opinion. Perhaps, a better tactic would be to argue that the Republicans/Trump would make the situation (inflation, economic uncertainty/risk of a recession etc) worse....
https://www.cnn.com/2023/08/03/politics/cnn-poll-economic-pessimism-joe-biden/index.html
It's quite clear that many voters hold Biden responsible for the persistence of high prices over the past two years. But where they actually need to look is to the nearest corporate boardroom and ask why, despite inflation having come way back down, they're still charging the prices they're charging. If they were just "passing along higher costs" we shouldn't be seeing the eye-watering profits that we are each quarter these days. Those profits are up because costs have come down, but companies are still adding a 20% surcharge and calling it "inflation". Nice work if you can get it.
That doesn't help Biden, unfortunately, but our media (har!) could do a much better job explaining why the President, whether Democrat or Republican, really can't do a whole lot about what stuff costs without going all communist and imposting price controls or something.
Well, corporations deserve their record-high profits over the last 3 pandemic years, alongside the high profits they enjoyed after the Trump tax cuts. There is no limit to what corporations need from us.
See Paul Waldman at MSNBC : http://www.msnbc.com/opinion/opinion/republican-economy-voters-bias-partisan-2024-rcna126194
The polling on this is very much skewed by the absurd partisanship on the right.
It's the reverse of Bush Kept Us Safe... except for that first year, which somehow is All Clinton's Fault. Trump Kept Us Rich... except for that last year, which somehow is All Biden's Fault.
Democrats are always to blame for everything... and then always the only people we can hire/elect to clean up the gigantic economic and war messes that just somehow keep happening when Republicans are in office. Weird how this cycle just keeping happening over and over and over and over again...
Hear, hear!!
Yep.
Trump always makes/made China the enemy and evildoer and said he would stop them/that country from evildoing, but he also said China was responsible for the pandemic and released the virus intentionally. So Trump will stop China but Trump also allowed the virus to kill 1 million Americans? Huh?
I have always been amazed his fans don't think he's a phony for this discrepancy. And the conclusion I draw is that his fans like him specifically because he makes so little sense. It's their revenge against doing poorly in school and feeling disrepected in million other ways too I guess.
"It's their revenge against doing poorly in school and feeling disrepected in million other ways too I guess."
That covers some of them, but not all, and I don't think even a majority.
I think for the majority of his supporters, he allows them to be immoral (by their own standards) without feeling guilty about it.
Trying to find any logic or consistency in how Republicans, particularly MAGA Republicans, think is a mug's game. China released the virus, which was a hoax, but killed millions, but is easily cured with worm paste, so no big deal. 'Nuff said.
well said jte21
Trump’s fans like him because they are living in an alternate reality.
Inflation? Under Trump inflation was very low. Wages were going up by A LOT. The economy was going great. Our borders were secure. Putin would never have attacked Ukraine and Hamas wouldn’t have dared attack Israel. Trump had great plans to strengthen Social Security and replace Obamacare with something much better and cheaper. He won the 2020 election in a landslide and even California voted for him by A LOT. Unfortunately his great victory was stolen by the evil DEEP STATE. But when elected this time he will utterly crush the DEEP STATE and all others who support them. Only then can we return to the paradise that only Trump can achieve.
The really scary thing is how many people have deluded themselves into believing the above is true. And even his supporters who aren’t true believers do believe enough of it to vote for him.
For all those claiming it's clear as day that the stimulus was responsible for the 21-22 inflation, please, show your work. Had we been at full employment and regular economic growth throughout 2020, yes pumping several trillion dollars into the economy would have caused serious inflation. But the economy had cratered due to the pandemic and the stimulus really only brought things back up to level.
Also, please to explain how inflation also afflicted the rest of the world which... *checks notes*... did not get big stimulus checks from Joe Biden.
For all those claiming it's clear as day that the stimulus was responsible for the 21-22 inflation ... Read Krugman.
And much (most?) of the "free money no strings attached" stimulus was actually passed in the year 2020, when Biden wasn't president. So I guess the Dems have a time machine to be responsible for things that occurred under Trump's watchful eye... but not a good enough time machine to go back and rig all the elections for Congress alongside the election they rigged for Biden, so he could enjoy filibuster-proof margins for his dastardly agenda. So. Much. Stupid. It. Hurts.
Under Trump my psychic wage for being white, straight, male and Christian had almost -- almost -- clawed its way back up to pre-Obama levels.
Then.... Biden....crash.
For those of you who don't have access to the NYT except through their local library, here's Paul Krugman on Immaculate Disinflation.