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The Ruling Class’s Inflationary Policies Hurt America’s Working Class The Most

price increases at a cafeteria
Image Creditatramos / Flickr

The Biden administration continues to advocate for its tax-and-spend agenda, ignoring the fact that massive money-printing has left many Americans worse off.

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Switching to a cheaper cell phone plan. Buying chicken instead of steak, or canned vegetables instead of fresh ones. Giving up vacations, and taking on an extra job to make ends meet.

These represent some of the hardships and sacrifices faced by millions of working-class American families. Even the leftist media has started to acknowledge the ways inflation gives a proverbial kick in the teeth to struggling households.

Yet the Biden administration continues to advocate for its tax-and-spend agenda, ignoring the fact that rapid money-printing by both Congress and the Federal Reserve has left many Americans worse off.

Wealthy Americans Less Affected

A recent Washington Post analysis of consumer buying patterns found that lower-income households spent more than higher-income households on eight of the ten categories with the greatest amount of inflation in the last year. Only on furniture and cars did high earners spend more than lower earners.

It stands to reason that lower-income families face greater hardship from inflation than wealthier ones, for several reasons:

  • Wealthier families are more likely to own their own homes, with many having either no mortgage or a fixed-rate mortgage. Because most homeowners have their monthly housing costs fixed, they do not face annual rent increases, which averaged 14.1 percent last year, according to online brokerage Redfin.
  • Because wealthier families generally save more than lower-income families, they can reduce their savings rate, or rely on some of those savings, to help cushion rises in prices.
  • Wealthier families can more readily use substitution effects to offset higher prices. While an affluent family can buy chicken instead of steak when the cost of steak rises, and a middle-class family can buy beans instead of chicken, a lower-income household already using these and similar tactics (e.g., discount stores, clipping coupons, etc.) to stretch the family budget has little choice but to pay higher prices when prices rise.

Workers Losing Ground

The latest price and earnings data from the Bureau of Labor Statistics (BLS) highlights the problem. While real hourly earnings increased by 0.1 percent in January, they fell by 1.7 percent over the past year, because prices continue to rise higher than wages.

To put it another way: A worker earning $1,000 in January 2021 would have earned $1,057 in January 2022, based on the 5.7 percent average increase in wages nationwide. But based on the 7.5 percent average increase in prices over that time span, that worker would have needed $1,075 to buy the same goods that had cost $1,000 just one year earlier—making the worker worse off than before.

A monthly chart from the BLS report shows how, over the last year, workers continue to fall farther and farther behind every month, with prices rising faster than wages:

Little wonder then that the Post quoted one hourly worker as saying that “we haven’t been able to enjoy life, but are rather in survival mode.”

Under Biden, Americans Are Not Better Off

Compare this misery to a stunning statistic from a Census Bureau report: In 2019, the last year before the pandemic, real median incomes rose by 6.8 percent. That’s a $4,400 jump, after accounting for inflation, in a single year.

Also, those income gains were widespread: African Americans, Hispanics, foreign-born individuals, and women all saw greater income growth than did white males. While Democrats occasionally treat voters as fools, most Americans can recognize and recall the prosperity they had not long ago—and whose policies trapped them into a spiral of skyrocketing prices and tighter budgets.

Four decades ago, Ronald Reagan put the final nail in Jimmy Carter’s political coffin by asking a devastatingly simple question: “Are you better off than you were four years ago?” He followed up with another particularly pertinent query: “Is it easier for you to go and buy things in the stores than it was four years ago?”

For the millions of Americans struggling to afford the basics of life, the answers are obvious—as should be the verdict on the Democrat agenda.