Inflation is at a 40-year high and the White House's focus on 'Putin's gas price spike' isn't convincing

AP Photo/Alex Brandon

The evidence that we’re living through a repeat of the Carter/Reagan years continues to add up. This morning we learned that the Personal Consumption Expenditures price index was up last month to levels not seen since the early 1980s:

The Personal Consumption Expenditures price index rose 6.4% in February from the same period a year earlier. It was the fastest increase since January 1982, the Bureau of Economic Analysis reported Thursday.

Stripping out volatile food and energy costs, the index, which measures the inflation on consumer spending, rose 5.4% between February 2021 and 2022. That was the fastest increase since April 1983.

Notice that inflation is over 5% even without energy costs, which makes it pretty clear that the problem is not just about gas and oil hikes caused by Putin’s invasion of Ukraine. But today the White House announced it would dip into the strategic petroleum reserve to combat “Putin’s gas price hike.”

To be clear, there definitely has been a price hike connected to the war in Ukraine. But gas prices were trending up long before the war started. More importantly, the inflation we’re seeing now is not solely or even primarily the result of the war. Inflation would be happening even if the war had never started.

The NY Times has a story today explaining how wage growth is a sign that inflation appears to be moving from goods to services. Basically, during the pandemic spending on services like dining out went down while spending on goods like new washing machines went up. Supply chain issues and excess demand caused by a flood of government money created inflation on the goods side of the equation which we’re still seeing. But rising wages suggest employers can’t find enough workers to meet demand. As employers raise wages to both hold on to the workers they have and attract new workers to meet the demand, those higher wages get passed on as higher costs for consumers.

MaidPro, a home-cleaning firm, has seen a surge in demand from professionals who are spending more time at home. But it is having trouble finding workers to keep up, said Tom Manchester, the company’s president.

“Our demand right now outstrips our supply of being able to service that demand,” he said. “Demand has just continued to be strong — like double-digit strong. And if we could find qualified pros to meet the demand, we’d be even more ahead than we are today.”

Mr. Manchester said hourly wages were up $1 to $3, adding to costs at a time when cleaning products have gotten pricier and higher gas prices have made travel reimbursements more expensive. MaidPro franchisees have been able to pass those costs on to their customers, both via fuel surcharges and outright price increases that have more or less kept up with inflation.

So far, they have lost few customers — in part because few competitors have capacity to take on new customers.

So in the midst of all of this, having the president repeating the line about the “Putin’s gas price hike” is sort of beside the point. The Washington Post reports Biden’s blame game isn’t really convincing many people.

A poll released Thursday from the Kaiser Family Foundation found 55 percent of Americans say inflation and rising prices are the biggest problem right now — far more than the 18 percent who name the Russian invasion of Ukraine. Even Democrats pick inflation and gas prices by a 2-to-1 margin. Another poll from Quinnipiac University on Thursday found twice as many name “inflation” (30 percent) as “Russia/Ukraine” (14 percent) as their No. 1 issue…

The Quinnipiac poll shows just 24 percent say the war in Ukraine is “the most responsible for the recent rise in gas prices” — compared with 24 percent who blame oil companies and 41 percent who blame the Biden administration. (Another 5 percent blamed increasing demand from the easing of pandemic restrictions.)

If there’s a kernel of good news in there for Biden, it’s that more people blame some combination of oil companies and the war (48 percent) for gas prices than blame the administration (41 percent). The same is true for inflation, where the NBC poll showed 38 percent blamed Biden, while 28 percent blamed the pandemic, 23 percent blamed corporations and 6 percent blamed the war.

Again, you can make a good argument that the war is responsible for the disruption in the past month or even earlier based on anticipation of what might happen. But people are right to discount the idea that the war caused the inflation which a majority of Americans now see as the biggest problem we are facing.