We don’t know everything that the week ahead holds, but on Thursday, the U.S. Department of Labor will release the latest numbers in the Consumer Price Index (CPI), giving us a look at the cost of inflation in the month of September. In August, the CPI was 8.3 percent, after being 8.5 percent in July and 9.1 percent in June. The Federal Reserve Bank of Cleveland is expecting the inflation rate to be around 8 percent; Kiplinger’s expects it to remain around 8 percent until the end of the year. As usual, we don’t know what the exact figure will be, but we know the number isn’t likely to be particularly good news.
A Monmouth University poll released last week found that 82 percent of respondents consider inflation to be either an “extremely important” or “very important” issue, and just 30 percent approve of how President Biden is handling the issue. The partisan breakdown is about what you would expect:
About 8 in 10 Republicans put inflation, crime, and immigration at the top of their issue list. A similar number of Democrats prioritize climate change, racial inequality, elections and voting, gun control, and abortion, with about 3 in 4 also giving emphasis to jobs and inflation. However, the only issue which more than 3 in 4 independents place high importance on is inflation. Additionally, independents are more concerned about overall economic issues along with crime and immigration than they are by other issues.
In other words, on Thursday morning, we will get new numbers that will spur a news cycle heavily focused upon inflation, probably the last one before Election Day. October’s CPI numbers are released November 10 — two days after Election Day. (Also, it is possible that races in Georgia and Louisiana will go to runoffs.)
When President Biden is pushed on the issue of inflation, he usually crumbles; in his recent 60 Minutes interview, he insisted that, “Inflation hasn’t spiked. It has just barely — it’s been basically even.” Let’s keep in mind though, that inflation remaining “basically even” near the worst rate in 40 years is a terrible place to be.
Even when he’s not speaking off the cuff, Biden doesn’t have much of a better argument. Everyone focused upon his silly opening line from Friday, “Let me start off with two words: Made in America.” But Biden’s meandering remarks — which began with him saying that his father’s regret was that he never went to college — contended that the two reasons inflation is so high is because families must pay so much for insulin and because corporate taxes are too low. U.S. federal corporate tax revenue came in at a record high of $372 billion in fiscal year 2021. As the Tax Foundation dryly observed:
This year’s robust corporate tax collections calls into question efforts by the administration and congressional Democrats to increase the corporate tax rate and raise other corporate taxes based on claims of relatively low tax collections following the Tax Cuts and Jobs Act (TCJA) in 2017. In fact, corporate tax collections this year are about 25 percent higher than the $297 billion collected in 2017, prior to passage of TCJA. Likewise, as a share of GDP, corporate tax collections are higher this year (1.63 percent) than in 2017 (1.52 percent).
Biden’s knee-jerk instinct is to argue that the reason inflation is high is because taxes are too low, which is nonsensical, because taxes were low for years before the inflation rate spiked.
I suspect that people’s perceptions of inflation are driven by two regular purchases: groceries and gasoline. Even when gas prices were declining from their mid June record high, American consumers continued to feel pain at the checkout counter:
Some sobering news for US shoppers: There’s little relief in sight on grocery store bills.
Grocery prices climbed 13.5 percent in August from the year before, the highest annual increase since March 1979, according to government data.
Executives at large food manufacturers and analysts expect inflation to hover around this level for the rest of 2022.
Next year, the rate of food inflation is expected to moderate — but that doesn’t mean prices are going to drop. Once prices hit a certain level, they tend to stay there or go up, but rarely down.
Of all the goods that consumers buy regularly, gas prices are the ones that are likely the easiest to track. Gas prices are advertised on the big signs of gas stations on just about every major road and highway in America, and people generally remember what the price was last week and last month, and how much they usually pay when filling up their tank. The price of eggs has jumped dramatically — as have the prices of white flour, chicken breasts, milk, and potatoes — but people don’t see those prices on big signs as they drive to work every weekday.
The national average price for a gallon of regular unleaded gas is up to $3.91, an increase of 19 cents in the past month. The usual capacity of a U.S. car’s gas tank is 13 to 16 gallons, so this week, lots of Americans will notice that, “Hey, that’s about $2 or $3 dollars higher than I paid last month.” What should really worry the Biden administration is the psychological threshold of $4 a gallon; I’d contend that seeing the $4 on the big sign is what gets people saying, “Wow, gas is really expensive again.” As of this morning, 13 states have statewide averages above $4 a gallon, and Wisconsin ($3.98), Ohio ($3.92) and Pennsylvania ($3.88) are knocking at that door. Say, are any big statewide races currently occurring in those places?
(At a statewide average of $6.33, California is still close to its all-time record of $6.43 per gallon. This is mostly due to the state-specific tax and regulatory and refinery issues I discussed last week.)
The CPI numbers will be released Thursday morning; that evening, Wisconsin Republican senator Ron Johnson and his Democratic challenger Mandela Barnes will meet for their second debate. This coming Friday night is the only scheduled debate between Georgia Democratic senator Raphael Warnock and his Republican challenger, Herschel Walker — the same night as a debate between Wisconsin Democratic governor Tony Evers and Republican challenger Tim Michels. The following Monday, Utah GOP senator Mike Lee and his “unaffiliated” but de facto Democratic challenger Evan McMullin will debate. The inflation rate and gas prices will likely be hot topics in all those debates.
Also, if you’re the kind of suspicious mind who thinks that Democratic campaigns or the White House save up “October surprises” to release into the news cycle when they need to distract from bad news . . . the end of this week would likely be a prime occasion to drop some premium opposition-research dirt.
According to professor Michael McDonald, who collects the early vote statistics from all the states, as of yesterday, more than 662,000 Americans have already voted in the midterm elections.