President Biden tried to put a positive spin on soaring inflation Monday, saying that “disposable income” has increased due to government aid — but not mentioning that wages are actually losing purchasing power due to spiking prices.
Biden offered the rosy take while announcing his decision to nominate Jerome Powell for a second four-year term as Federal Reserve chairman.
“After years of wages being flat or falling behind, we’re also seeing something else. Things are getting better for American workers: higher wages, better benefits with flexible schedules,” the president said.
“Balance sheets for American families are better as well: savings are up, home equity is up, credit card balances are down,” Biden added. “And if you continue and combine the wage increases we’ve seen with the direct relief my administration’s provided to middle class families, the typical middle class family’s disposable income has actually gone up 2 percent this year, even after accounting for higher prices.”
The president continued: “America is the only major economy, the only one in the world, where the economy is bigger today and families have more money in the bank today than before the pandemic hit. That’s even after accounting for inflation.”
But the value of money earned by workers — without including government subsidies — is down this year due amid the highest inflation in 31 years, according to official data.
The Bureau of Labor Statistics said earlier this month that although wages are increasing, they aren’t rising fast enough.
“Real average hourly earnings for all employees decreased 0.5 percent from September to October, seasonally adjusted … This result stems from an increase of 0.4 percent in average hourly earnings combined with an increase of 0.9 percent in the Consumer Price Index for All Urban Consumers,” the BLS said.
Inflation took an even bigger bite out of wages when measured over a 12-month period. The Labor Department’s Consumer Price Index jumped 6.2 percent in October from a year earlier, erasing wage gains and reflecting the highest bump since 1990 in the cost of goods and services.
“Real average hourly earnings decreased 1.2 percent, seasonally adjusted, from October 2020 to October 2021,” according to the BLS report.
“The change in real average hourly earnings combined with a decrease of 0.3 percent in the average workweek resulted in a 1.6-percent decrease in real average weekly earnings over this period,” according to the report.
Biden was able to argue that real disposable income is up due to subsidies included in a $1.9 trillion COVID-19 stimulus bill that passed in March. The bill temporarily boosted the child tax credit, which formerly was $2,000 per child before being bumped to $3,000, or $3,600 for kids up to 6 years old.
Earlier this month, the president surprisingly admitted that the COVID-19 stimulus bill helped fuel the declining buying power of the US dollar by giving most people $1,400 checks and hiking child tax rebates.
“What happens if there’s nothing to buy and you got more money to compete for getting [goods]? It creates a real problem,” he said during Nov. 10 remarks in Baltimore.
Biden earlier this year claimed inflation was “transitory” and more recently has blamed the issue on supply chain bottlenecks at major ports and lower oil production. On Monday, he argued other major companies also are suffering from inflation.
“We know there’s a lot of fear and uncertainty. We know it’s tough for families to keep up with the rising cost of gasoline, food, housing and other essentials. It’s not just an American problem. It’s a worldwide problem,” Biden said.
“It doesn’t make it easier for Americans, but it’s a worldwide problem. Every country is dealing with the same problems emerging from the pandemic: supply chain bottlenecks, disruption caused by spikes and COVID-19. elevated prices — they are all taking a bite out of our family budgets. Perhaps no entity plays a more important role in navigating these challenges than the Federal Reserve.”
Rising inflation has contributed to Biden’s plummeting approval ratings.
Biden last week signed a $1.2 trillion bipartisan infrastructure bill that the Congressional Budget Office said included $256 billion in unfunded spending, potentially worsening inflation — though Biden argued the legislation would ultimately lower inflation by improving the transportation of goods.
Congress is currently considering a nearly $2 trillion social and environmental spending bill that the CBO says would add $367 billion in unfunded spending. However, Biden has argued that it would lower the cost of living, particularly for people with children, due to an extension of the child tax credit bump and new subsidies for child care and universal preschool for 3- and 4-year-olds.