The new Consumer Price Index is out and our friend David McIntosh, President, Club for Growth delivered a scorching analysis of the numbers.
"Predictably, the Biden administration is doing all it can to spin this week’s dismal inflation numbers into another victory for so-called Bidenomics. But make no mistake, the American
People are worse off today than they were in January 2021. Too many more of these ‘victories’ and the American consumer will hardly be able to afford anything. Inflation is about to spike even more – with higher energy prices as the major culprit. This administration has done everything it can to stifle energy exploration and development, only to act surprised when energy prices climb as a result. Last year, the Biden administration drained the Strategic Petroleum Reserve to its lowest level in decades to artificially lower gas prices leading up to the mid-term elections, a political strategy disguised as economic policy. Last week, the administration cancelled a planned restocking of the reserve because of - you guessed it – rising oil prices. This administration has no answer for inflation. And it shows," said former Congressman McIntosh.
Consumer prices rose 3.2 percent in the year through July, so it is true that annual inflation is down after peaking at 9.2% a year ago. Biden may claim he deserves credit for the reduction, but in reality, this is another case of a Democrat being both the arsonist and the fireman. The causes of the surge in inflation were the totally out of control spending bills Democrats rammed through Congress in the first two years of the Biden presidency.
In a recent edition of his must-read Committee To Unleash Prosperity Hotline Stephen Moore threw a lot of cold water on Biden’s claim that he cured inflation.
As Steve pointed out, he forecast the decline in inflation from last summer’s 9.2% high – ahead of much of the rest of the crowd. Steve said it’s not because he was clairvoyant but because he believes the best forward-looking indicator of future inflation is the commodity price index, aka the CRB index.
Check out the chart below. You can see why Stephen Moore and the Committee To Unleash Prosperity saw inflation falling from last summer’s high water mark as commodity prices sank. But look at what has happened with commodity prices over the past month. They are the highest since last summer.
According to TradingEconomics.com, “The CRB Commodity Index rose above 310, reaching nearly a one-year high amid hopes for demand recovery and the end of monetary tightening, as well as gains in the energy and agriculture sectors. WTI crude surged above $79 per barrel thanks to China's pledge to roll out more policies. At the same time, agricultural commodities, which account for more than 40% of the index, continued their upward trend, with prices of cocoa and wheat soaring on shortage fears. Also, the cost of an orange juice broke an all-time record. Meanwhile, copper, considered a barometer for the world's economy, reclaimed $3.9 per pound. Among precious metals, silver hovered around a two-month high of $25…”
This is despite 11 Fed rate hikes over the past 14 months and is not at all consistent with pushing inflation down to the 2% Fed inflation target. Steve Moore says the best way to bring inflation down is not to raise interest rates - which hurt the economy - but to cut government spending by $1 or $2 trillion – which helps the economy, and we agree.
But that’s not where Joe Biden’s Federal Reserve is headed. The Biden Fed hiked rates a quarter point last week after a pause in rate increases in June. Biden policymakers also hinted at another increase to come this year, meaning car loans, home loans and credit sensitive purchase generally will get more expensive.
So, what Joe Biden calls bringing down inflation is more properly called killing their jobs by folks swinging hammers on home construction sites, selling cars in auto showrooms, and showing new and existing homes in real estate offices.
We’re not sure if curing inflation by killing the jobs of millions of Americans fits the constitutional definition of an impeachable offense. Joe Biden can joke about it all he wants, but “curing inflation” by killing jobs sure won’t help Democrats in the 2024 election.
Club for Growth
commodity price index