I’ve been writing for years about how progressive policies championed by the Democratic Party and served under the guise of caring about low-income Americans end up hurting those same communities.
The last chapter of this saga is the cycle of inflation that has just started, the worst that our country has known in 40 years.
Two important points here are that one, we can blame the blame for this inflation directly on the Biden administration, and two, those most affected by this inflation are the very low-income Americans that this administration claims to care so much about. .
A recent report from the Federal Reserve Bank of Minneapolis focuses on the disparate impact of inflation on different communities, causing the most damage to low-income Americans.
According to the report, although a single figure for inflation is reported nationwide, different households do not bear the brunt of it in the same way.
According to a late 2021 Gallup survey, 45.5% of all Americans said they experienced “severe” or “moderate” hardship caused by inflation.
However, the story changes dramatically when broken down by income. Among those whose income is less than $40,000, 70.7% say they experience “serious” or “moderate” difficulties. And 46.5% of those earning $40,000 to $99,999 and 28.3% of those earning $100,000 or more reported experiencing “severe” or “moderate” difficulty.
The report offers various explanations for why inflation hits low-income households the hardest. These include the fact that low-income households have a lower percentage of interest-bearing assets, which means their world is mostly made up of cash. And inflation takes its heaviest toll on liquidity.
High-income households have more flexibility to adjust their behavior than low-income households. And low-income households tend to rent rather than own, and rent is more volatile in an inflationary environment.
The tragedy is that inflation is not a surprise attack. We know what causes inflation. Like many physical illnesses, we know their causes, and those who fall victim to them do so not out of lack of knowledge, but out of irresponsible behavior.
Despite the fact that we know the damage caused by smoking, excessive alcohol consumption or poor diet, people still do it.
We know that inflation is caused by excessive injection of money into the economy. If today an apple costs $1 and tomorrow the government prints another dollar, without producing another apple, the price of an apple will rise to $2.
Economists were widely reporting that the Biden administration was spending too much money and that the outrageous spending was authorized by the Federal Reserve.
Harvard economist and former Treasury Secretary Lawrence Summers wrote in the Washington Post last May, nearly a year ago: “The risk of inflation is real,” noting that the problem is “the overheating, not excessive slackening”.
This follows the Biden administration’s $1.9 trillion relief spending and the start of the bid to push through the $4 trillion Build Back Better program, stopped by the brave renegade senator from West Virginia. , Joe Manchin.
Meanwhile, the Federal Reserve, under Chairman Jerome Powell, in its late April statement still forecast inflation at 2% and called the current price hike “transitional”.
In July 2021, economists Steve Hanke of Johns Hopkins University and John Greenwood of Invesco predicted in the Wall Street Journal that “by the end of the year, the inflation rate of year over year will be at least 6% and possibly up to 9%.” It reaches 7.9%.
Yet in November President Joe Biden renominated Powell for a second term as Federal Reserve Chairman, despite his gross mismanagement that has led to the inflation we are experiencing today. Biden, in his statement, praised Powell for his “decisive action” and “consistent leadership.”
Low-income Americans trying to stay above water in this new flood of inflation are likely less grateful to Biden and Powell for so-called leadership.