While Biden’s employment strategy appears to be working, increasing inflation has eroded any wage gains for working-class Americans. However, the primary concern here is the point of all this “Biden inflation tax” controversy? What effect does inflation have on the daily lives of regular people? Using Bureau of Labor Statistics data, the graph below pay and inflation rates from 2017 through July this year. Wage rates are represented in blue, and inflation (CPI) is shown in red. When blue is on top, as it has been during Trump’s presidency, worker salaries exceed inflation, and living standards rise. No way, not with red in the forefront.
Despite President Biden believing his employment strategy is “undeniably effective,” this graphic demonstrates that it is not, especially not for American workers. Instead, inflation has increased, wiping out any wages earned by the workers.
Therefore, why is inflation increasing under Biden’s watch? A supply-demand imbalance is one factor. Following the pandemic, Americans are experiencing unprecedented government generosity. As a consequence, personal savings exceeded $400 billion in June 2018 compared to January 2020. Individuals have money to spend, which they are now doing. However, the pandemic affected industrial as well as supply networks. In simple words, people couldn’t work, and businesses couldn’t predict demand. Supply chain disruptions have been exacerbated due to insufficient regulations that reward employees for not working more than they can earn working. Companies cannot make or distribute products unless they find workers.
Furthermore, according to Federal Reserve Bank Chairman Jerome Powell, supply chain problems are only transitory bottlenecks. According to Julian Zelizer, the more money there is, the less it is worth and the longer it takes to acquire products. Since February of this year, the money supply has grown by 32 percent, nearly a third, representing a significant increase. President Joe Biden and his Democratic colleagues urge Congress to approve additional spending as part of a $3.5 trillion budget reconciliation bill. According to an independent analysis done by the non-profit Committee for a Responsible Federal Budget, the actual costs of the package would exceed 5 trillion dollars if assessed accurately.
However, Sen. Joe Manchin expressed severe concerns about the disastrous repercussions of Congress voting to spend another $3.5 trillion in an economy on the verge of overheating. He also highlighted that inflation had become an unavoidable drain on every American’s earnings and income. Therefore, at least one Democrat seemed to understand what Americans are concerned about. Moreover, Joe Biden claims that more spending will lower inflation, decrease inflation, and reduce inflation, yet this will not be the case. John Christensen, an economist, refers to it as the Magic Money Tree. The administration would argue that expenditure is irrelevant since the government can produce unlimited amounts of money rather than depending on taxpayers to pay the bills. The Fed and Democrats would inject cash into the economy to test this hypothesis. As a result, prices for everything from gasoline and food to automobiles and even homes are rising.