Twice in the past few weeks President Joe Biden has claimed that when he took office in January 2021 inflation was “over nine percent.” First on CNN’s OutFront with Erin Burnett on May 8 and again on May 14 in a Yahoo! Finance interview, the bizarre comment was made. And as has become a routine with the gaffe-prone chief executive, White House staffers added shamelessness to what could have been limited to embarrassment by issuing a statement: “The President was making the point that the factors that caused inflation were in place when he took office. The pandemic caused inflation around the world by disrupting our economy and breaking our supply chains.”
Americans will have to decide for themselves if the claim made by Biden was a lie intended to mislead anyone not familiar with the trajectory of prices over the past several years, or an innocent error. It is a choice US citizens have been confronted with frequently, in particular where assertions regarding the health of the economy have been made.
If an honest mistake, it simply may be that the President confused the January 2021 inflation number with a number of other price statistics beginning with the number nine in the month of his inauguration. Below are several possibilities.
In January 2021, the Bureau of Labor Statistics reported in their consumer prices summary that the average price of a boneless sirloin steak was $9.418. By April 2024 that price had risen 27.5 percent to $11.662.
(Source: Bloomberg Finance, LP)
In January 2021, fifteen subindices of CPI began with the number nine. Their levels in that month, in the April 2024 report, and the percent change are shown below.
Category
Jan 2021
Apr 2024
Pct chg
1
Women’s dresses
90.881
112.831
24.20%
2
Tools, Hardware, Outdoor Equipment/Supplies
92.441
110.476
19.50%
3
Nonprescription Drugs
94.853
111.821
17.90%
4
Women’s Underwear, Nightwear, Sportswear
96.923
113.842
17.50%
5
Hospital and Related Services
936.837
1091.314
16.50%
6
Womens Apparel
97.492
113.453
16.40%
7
Medical Equipment and Supplies
95.402
110.01
15.30%
8
Women’s and Girls’ Apparel
98.301
112.528
14.50%
9
Sewing Machines, Fabric and Supplies
93.216
106.657
14.40%
10
Household Furnishings and Supplies
92.871
106.037
14.20%
11
Elementary & High School Tuition & Fees
901.66
1004.134
11.40%
12
Women’s Outerwear
90.642
98.659
8.80%
13
Telephone Services
94.165
94.624
0.50%
14
Recreational Books
99.671
98.626
-1.00%
15
Major Appliances
94.121
91.288
-3.00%
Sixty subindices of the Personal Consumption Expenditure Price Index began with the number nine in January 2021 as well. Their levels in that month, in the April 2024 report, and the percent change are shown below.
Category
Jan 2021
Apr 2024
Pct chg
1
Mutual Fund Sales Charges
93.182
204.823
119.80%
2
Auto Leasing
96.733
140.287
45.00%
3
Truck Leasing
96.706
140.247
45.00%
4
Motor Vehicle Leasing
96.765
138.747
43.40%
5
Food Produced and Consumed on Farms
99.567
138.351
39.00%
6
Public Transportation
91.513
120.933
32.10%
7
Accommodation
93.386
119.068
27.50%
8
Foreign Travel in the United States
97.372
123.978
27.30%
9
Elementary and Secondary School Lunches
91.57
116.124
26.80%
10
Passenger Fares for Foreign Travel
91.751
115.091
25.40%
11
Financial Service Charges and Fees
95.364
118.713
24.50%
12
Securities Commissions
95.608
118.083
23.50%
13
Admissions to Specified Spectator Amusements
97.666
119.466
22.30%
14
Market-based PCE Financial Services & Insurance
96.438
114.992
19.20%
15
Photo Studios
97.754
115.279
17.90%
16
Nonprescription Drugs
97.365
114.568
17.70%
17
Window Coverings
94.669
110.136
16.30%
18
Children’s and infants’ clothing
96.357
111.572
15.80%
19
Other Medical Products
95.8
110.87
15.70%
20
Therapeutic Medical Equipment
95.801
110.87
15.70%
21
Clothing Materials
99.749
114.595
14.90%
22
Sewing Items
99.751
114.597
14.90%
23
Photo Processing
92.004
105.667
14.90%
24
Furniture and Furnishings
99.927
114.063
14.10%
25
Personal care products
99.213
112.852
13.70%
26
Film and Photo Supplies
92.224
103.706
12.50%
27
Luggage and Similar Personal Items
96.722
108.592
12.30%
28
Internet Access
99.197
111.186
12.10%
29
Mens and Boys Clothing
97.341
108.557
11.50%
30
Therapeutic Appliances
99.271
110.502
11.30%
31
Control Group
99.722
110.412
10.70%
32
Taxicabs and ride sharing services
98.409
108.25
10.00%
33
Intracity Mass Transit
98.501
108.351
10.00%
34
Garments
93.191
102.508
10.00%
35
Clothing and Footwear
94.361
103.729
9.90%
36
Market-based PCE Clothing and Footwear
94.353
103.72
9.90%
37
Other Clothing & Footwear
98.401
107.891
9.60%
38
Shoes and Other Footwear
98.291
107.685
9.60%
39
Finished Goods less Food and Energy
98.946
108.325
9.50%
40
Durable goods
97.78
106.377
8.80%
41
Womens and Girls Clothing
90.343
98.049
8.50%
42
Jewelry
97.073
105.266
8.40%
43
Jewelry and watches
99.087
107.103
8.10%
44
Recreational Items
92.353
99.648
7.90%
45
Foreign Travel By US Residents
98.902
106.014
7.20%
46
Cosmetics, Perfumes, Bath, and Nail Preparations and Implements
96.251
102.485
6.50%
47
Sporting Equipment, Guns, and Ammunition
99.706
105.444
5.80%
48
Clocks, Lamps, and Decorator Items
92.067
96.885
5.20%
49
Other durable goods
92.242
95.315
3.30%
50
Market-based PCE Durable Goods Other than Motor Vehicles & Parts
94.162
97.049
3.10%
51
Nonelectric Cookware and Tableware
91.406
92.865
1.60%
52
Educational Books
99.295
99.601
0.30%
53
Other Direct Commissions
96.539
96.653
0.10%
54
Medical Laboratories
98.02
98.091
0.10%
55
Communication
93.404
92.69
-0.80%
56
Market-based PCE Communication Services
93.404
92.69
-0.80%
57
Household Linens
94.126
93.351
-0.80%
58
Motorcycles
99.748
98.92
-0.80%
59
Employment Agency Services
98.682
94.998
-3.70%
60
Personal Computers and Peripheral Equipment
90.071
85.868
-4.70%
Alternatively, Mr. Biden may have mistaken a different January 2021 economic statistic with the July 2022 year-over-year headline CPI number.
The spread between the 1-year US Treasury bill and the 10-year US Treasury note was 97.9 basis points (0.98 percent) in mid-January 2021. That spread inverted in mid-2022, about the time that headline CPI year-over-year actually reached 9.1 percent. A normal yield curve slopes upward, with a positive spread showing that longer-term bonds yield more than shorter-term ones, typically reflecting expectations of economic growth and rising future interest rates. An inverted yield curve slopes downward with a negative spread as shorter-term bonds yield more than longer-term ones. Those conditions are often considered a predictor of an economic recession. As of May 2024, the 1-to-10 year spread has been negative for over 600 days.
1-year Treasury bill 10-year Treasury note spread (Jan 2021 – present)
The Federal Reserve’s Industrial Production (IP) Index was at 98.8 in January 2021. Owing to lockdowns and other pandemic policies, the index plummeted to a low of 84.6 in April 2020 and was recovering early in 2021. But despite hitting a post-pandemic high of 103.5 in September 2022, the IP Index hasn’t yet recovered its September 2018 all-time high of 104.1. Since the start of 2024, the index has declined, currently oscillating between 101.8 and 102.8.
Industrial Production (2014 – present), with all-time high (red dotted line), and January 2021 (black vertical line) indicated
(Source: Bloomberg Finance, LP)
It’s possible that Mr. Biden has once again fumbled details accidentally. Yet the consistency of those blundered messages, each absolving his administration of responsibility for declining economic conditions, is simply not consistent with randomness. American citizens have been told that corporate profits, Vladimir Putin, owners of gas stations, and ocean shippers are responsible for the huge surge in prices. Month-to-month and year-to-year price change data has been conflated misleadingly, as have statistics regarding how the US inflationary surge compares to those in other nations.
Whatever the specific reasons, the desperate evasiveness is glaring. Knowing that the CPI was not “over 9 percent” in January 2021, but rather 1.4 percent, hitting 9.1 percent in July 2022, is one thing. Recognizing that the administration of monetary policy has become a third-rail issue to be evaded at all costs is another, more pressing, matter. Instead of properly attributing the increase in prices to expansionary monetary policies (and to a lesser extent, massive debt and deficits), many in the political establishment prefer to tell ham handed-lies which further erode an already ramshackle credibility. It may be that the political establishment believes that the American public is not sophisticated enough to understand the Fed. More likely, the ability of the Fed to provide a swift economic boost during crises (without the lengthy process that fiscal stimuli require) is deemed too important to endanger by drawing attention to: even the staunchly anti-high finance Elizabeth Warren voted against auditing the Fed in 2016. The bipartisan inclination to keep the US central bank out of critical discussions is one which, whether inflation subsides or the Fed heeds calls to normalize at the 3-percent level, demands closer scrutiny.
