In his State of the Union address, President Joe Biden hailed the strides made by his administration in tackling inflation.
“Wages keep going up and inflation keeps coming down,” Biden affirmed during his annual speech before Congress. While inflation has indeed abated and wages have seen an uptick, many households continue to grapple with the escalating cost of living.
“Factually, the president is, of course, correct,” remarked Mark Hamrick, senior economic analyst at Bankrate.com.
However, he noted, “It is difficult to tell people that inflation isn’t so bad as it was, given that it has taken about one-fifth of purchasing power away from people.”
The consumer price index, a crucial gauge of inflation, has gradually declined from its pandemic-era peak of 9.1% in June 2022 to 3.1% in January.
Yet, despite these positive economic indicators, numerous Americans find themselves living paycheck to paycheck amidst soaring prices for everyday goods, with many depleting their savings and relying on credit cards to make ends meet.
Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers, highlighted the disproportionate impact on lower-income families.
Moreover, he pointed out that reports indicate recent improvements in wage gains and consumer confidence have been modest.
Philipson offered a critical analogy, likening the Biden administration’s progress to a football team trailing by ten points at halftime, managing only a field goal and claiming victory.
Addressing what he termed the “last mile problem,” Sung Won Sohn, a professor of finance and economics at Loyola Marymount University and chief economist at SS Economics, emphasized a lingering challenge.
While inflation remains above the Federal Reserve’s 2% annual target, overcoming the final disinflationary hurdle without dampening economic growth and risking recession presents a formidable task, according to some economists.
“Much of the decline in the inflation rate in the past came from the easing of the supply bottlenecks, which are behind us,” Sohn observed.
