Joe Biden is demanding that corporations stop their price gouging and bring prices down to where they were when he took office.
“Any corporation that has not brought their prices back down, even as inflation has come down, even as the supply chains have been rebuilt, it’s time to stop the price-gouging,” Biden said at the launch of a new White House supply chain initiative, “Give the American consumer a break.”
King Canute would have had better luck commanding the tides not to come in.
Biden doesn't understand that the prices we're paying for goods and services now are not coming down, probably ever. True, the rate of price increases has slowed. But the underlying cost of almost all things that the American people buy on a weekly or monthly basis, including groceries, auto insurance, rent, and electricity, are way up and have that new level of prices built in.
Think of prices from the 1980s (I do so often and with great lament). One dollar in 1982 had the same purchasing power as $3.12 today. This isn't because corporations are greedy and gouge the American consumer (not as a general rule). It's that the price increases from the 1980s and beyond have been baked into the costs of everything we buy today.
Our economy is interconnected where the cost of everything depends on the cost of everything else. Joe Biden doesn't get this. Or more likely, he gets it but for political reasons, he's trying to shift the blame for sky-high inflation onto greedy corporations.
Bloomberg studied how the cost of living has changed in the last few years. It's a real eye-opener.
It now requires $119.27 to buy the same goods and services a family could afford with $100 before the pandemic. Since early 2020, prices have risen about as much as they had in the full 10 years preceding the health emergency.
It’s hard to find an area of a household budget that’s been spared: Groceries are up 25% since January 2020. Same with electricity. Used-car prices have climbed 35%, auto insurance 33% and rents roughly 20%.
Those figures help explain why Americans continue to register strong dissatisfaction with the economy: Consumers’ daily routines have largely returned to their pre-pandemic normal, but the cost of living has not.
Those prices will never return to their pre-pandemic levels. What's more, wages have failed to keep up with the inflated cost of living, leaving many Americans scrambling to catch up.
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“I don’t see any other way than food overall is going to be taking a higher share of people’s disposable income than before,” said Brandon McFadden, a professor in food policy economics at the University of Arkansas. “You can’t wiggle out of buying food.”
While wages are now rising faster than prices, a sense of reprieve for consumers is likely not imminent. Central bank policymakers are tilted toward keeping interest rates higher for longer, meaning borrowing costs will likely remain startlingly expensive in the near term. The October jobs report showed a notable cooling in the labor market, with unemployment ticking up to an almost two-year high of 3.9%.
“The reality is setting in for consumers that prices rarely go down, especially not in the aggregate. And so really the best they can hope for is prices leveling off and — at the very least — growing at a slower rate,” said Sarah House, senior economist at Wells Fargo & Co. “Hopefully they level off and give a chance for incomes to continue to grow.”
Presidents always try to blame corporations for high prices. In Biden's case, it's particularly ridiculous, considering Biden is saying that because the supply chain crisis has eased, prices should now come down. That's idiotic and not even true. Consumer Goods Technology reports that even though supply chains have improved, "this doesn't mean that all supply chain issues today have been laid to rest."
Biden's magical economic thinking isn't being called out by the media. But it really doesn't have to be. The American consumer will be the ultimate judge of Biden's words and they'll let him know what they think when they go into the polling booth in November of 2024.
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