Within a calendar year, the Biden administration has caused an insane level of inflation. Prices among all goods and services have risen so much by December 2021 that they had surpassed any single-year growth rate in 40 years. Totaling a 7% increase, it looks to impact those most vulnerable the most.
While a 7% drop in a stock portfolio (something many low and middle-income Americans do not have) is considered to be a blip on the radar, that kind of drop in a 401K or increase in the cost of living for most Americans can be the difference between surviving and failing. For years, many of the people in the lower and middle classes have been able to make ends meet and occasionally save a little by doing the easy things. Switching to off-brand food and cleaning products, using a lower octane gas, and going out less were seen as great ways to save money. However, this 7% jump wipes those savings away and, in many cases, even costs more than the name brands did a year ago.
Those earning lower incomes already have a target on their back. An unexpected car repair, a sky-high heating bill, or an accident that insurance doesn’t cover can mean the difference between keeping afloat and drowning in the sea of hyperinflation. The ability to create savings for emergencies does not exist when you are already living paycheck to paycheck with little prospects to improve your lot in life.
According to 2020 consumer expenditure data from the Bureau of Labor Statistics, the highest income households are only spending 65% of their income. This provides them that 1/3 savings cushion that everyone hears about but many rarely possess. Meanwhile, the bottom 20% are spending 190% of their after-tax incomes. While they receive the most in public assistance, tax refunds, and pandemic stimulus money, this is included in that figure from BLS. For those in the $24K-$45K brackets, they are doing vastly better, but at 110% of their after-tax incomes, they are still cash-poor. The middle earners $45K-$76K are the start of the reprieves as they only spend 89%.
Food prices are another area many Americans are really feeling the pinch. Low-income households buy based upon necessity, but with how nutrient absent many of those lower-cost foods are, they end up losing money on hospital and doctor bills as they try to stay healthy. The middle and upper classes tend to eat more for health and taste than the lower class. While they are still susceptible to the same pitfalls nutritionally as the lower-income people, they are not as likely to feel the effects in the long term. Their higher incomes allow them to choose better alternatives.
This may not remain the case, though. Food itself has seen a 6.3% inflation rate in the last year. With an average of a $500 a month budget for groceries, the same food order will now cost $530 with that 6% inflation. Fortunately, another large expense like housing and utilities are only up 4.1% within the last year; still the highest increase since 2007 and still short of the 2% target established by the Federal Reserve.
The biggest area where low- and middle-income consumers are feeling the pinch is transportation. Fuel is up 50% in the last year, with December representing the 9th straight month of a 40% or more increase; the longest timeframe since 1980. As many low- and middle-income Americans are unable to purchase an electric or even a hybrid vehicle, this is an especially crushing blow. A blow that Americans will certainly remember come midterm elections. Biden made this mess, and we need to get America away from him, his party, and their horrible handling of our economy. Even if they think this inflation is a good thing.