by Xin Ping
BEIJING, May 31 (Xinhua) — “Things are really looking up. Gas is up. Rent is up. Food is up. Everything.” President Joe Biden may laugh at the punchline at the White House Correspondents’ Dinner, but he can’t laugh off the facts.
Inflation affects Americans every day — at grocery stores, gas stations and households. Susan Pollack, a property manager shopping at a Costco in California, was startled to find that the price of a bulk pack of toilet paper had surged from 17 U.S. dollars to 25. At her local kosher butcher shop, the prices were rising even higher: more than 200 dollars for a five-pack of short ribs.
Other Americans are feeling the sting of inflation as well. According to the U.S. Bureau of Labor Statistics, consumer prices climbed 8.3 percent in April 2022 from the previous year. Despite a slight easing on an annual basis, inflation remains close to the fastest pace in almost 40 years, and is unlikely to cool down in the short term.
When daily necessities become pricier, Americans learn the hard way to save for a rainy day. Young people who still have student loans to pay off are maxing out their credit cards. People living paycheck to paycheck only have stagnant wages while the cost of living has skyrocketed. Angie Goodman makes about 15 dollars an hour as a housekeeper. She usually eats meat once a week. But now that steaks have doubled in price, Goodman said she might have to cut back her meat consumption to once a month. Adults may make do with a reduced calorie intake, but not babies risking malnutrition. Due to a nationwide recall and supply chain challenges, a formula shortage has brought panic and despair to less privileged households.
Accelerating price hikes hit vulnerable segments of society the hardest, undermine the standard of living, and erode the public’s confidence in the growth outlook.
A Gallup survey showed that 42 percent of Americans describe the current economic conditions as “poor,” 70 percent believe that the U.S. economy is “getting worse,” and 78 percent are dissatisfied with the direction the United States is heading in. While the United States is still not out of the woods from the pandemic, the issue that concerns the American people most has shifted from COVID to the economy and inflation, according to a CNBC survey.
Some Americans justifiably blame it on the U.S. Federal Reserve, which previously gave the economy a shot in the arm with quantitative easing. People thought their wealth was increasing, as asset prices were substantially pushed up by the liquidity flood after rounds of aggressive fiscal policies. This “wealth effect” led to an expansion of consumption and a rebound of aggregate demand. Greater demand in the market naturally drove prices up, and the rise was compounded by domestic shortages induced by the pandemic. The fact that the U.S. Federal Reserve left the floodgates wide open amid the pandemic ultimately sent prices soaring.
But the central bank should not take all the blame for inflation, as its decisions are at least more professional than those by some suited-up senior officials in Washington. The U.S. government is long used to seeing the world through political glasses and neglecting people’s livelihood in the process.
In 2018, the Trump administration imposed steep tariffs on China, which remain in place even though Biden has been at the helm for more than a year. But American consumers are the ones suffering from a higher cost of living because of the tariff hikes.
According to Moody’s Corporation, American consumers bear nearly 93 percent of the tariffs on Chinese goods like metals and solar panels. The Peterson Institute for International Economics concluded that reducing China tariffs could cut U.S. inflation by 1.3 percentage points. U.S. Treasury Secretary Janet Yellen admitted on April 22 that lowering U.S. tariffs on Chinese goods was “worth considering” because it could help ease inflation.
The incumbent administration may be pondering removing the tariffs imposed in the Trump era. In the meantime, however, it is creating more self-inflicted pain by imposing unprecedented sanctions on Russia, which has disrupted the global supply chain and driven up inflation worldwide, including the United States itself.
Mohamed A. El-Erian, chief economic advisor at Allianz, warned that the Ukraine crisis might drive U.S. inflation above 10 percent. Energy was the major reason for the price hikes, according to the U.S. Bureau of Labor Statistics. Overall energy prices were 30.3 percent higher than a year earlier, more than three times the rate of overall inflation. Food prices went up by 9.4 percent from one year earlier. An index for meats, poultry, fish and eggs rose 14.3 percent from the previous year, the largest annual increase since 1979.
The U.S. government has begun to scapegoat other countries for its own policy failures. But it is America’s selfish policies and trade war that have caused and perpetuated its inflation. The worst is yet to come. Goldman Sachs suggested that the chances of a U.S. recession in 2023 have increased sharply to 20-30 percent. The United States should know better. After all, it is the ordinary American people who are bearing all the pain.
(Xin Ping is a commentator on international affairs, writing regularly for Global Times, China Daily etc. He can be reached at email@example.com.)