The US inflation rate is the highest it has been in four decades. Unfortunately, inflation is often a hidden tax that is difficult for the average consumer to perceive. They know prices are going up, but they don’t have an accurate measure of how it is affecting them and their families.
Seamus Brennan found a way to put the last decade into some perspective by using the concept of a pay raise and a pay cut. Under President Trump (between 2017 and 2019) Americans received a $6,603 increase in median family income. That was essentially like a $6,000 pay raise. By contrast, under President Biden, families have lost an average of $6,000 in purchasing power. That is like a $6,000 pay cut.
Economist Stephen Moore compares this loss in purchasing power to someone stealing money from your bank account. He admits that it isn’t the same “as a bank robber” stealing from you, but at the end of the day it has had “the exact same unhappy result.” He and economist E. J. Antoni also found that the average 401(k) plan is down $34,000 in less than one year.
Speaking of E.J. Antoni, he has written another article that documents the one-two punch hitting the average American worker. That would be inflation and interest rate hikes. He observes that “there are plenty of homes and apartments across the country, but good luck finding one that’s affordable.”
Although the administration cites the rapid increase in nominal wages, they don’t mention that prices have risen faster than wages. So “the average American’s larger paycheck actually buys less than it did before.”
There is work to do for the newly elected Congress. It’s time to get started to help working Americans.