With the highest inflation rates in decades weighing heavily on the minds of many Americans, Republicans and Democrats have waged a message war over the real or negative quality of the economy.
In the Jan. 16 edition of NBC’s “Meet the Press,” Sen. Mitt Romney, R-Utah, took a photo of President Joe Biden’s handling of the economy and other matters of state.
“He had a bad year,” Romney, the 2012 GOP presidential nominee, said of Biden. “He’s had 52 weeks of bad weeks. I mean, people are 7% poorer now because of Biden’s inflation. Gas prices are, what, 50% higher than they used to be. were when he took office. The border is a mess. COVID was resurgent, but he hadn’t put in place the tests people needed to protect themselves. And then, of course, there was the disaster in Afghanistan. Russia is now threatening Ukraine. Things are not going well.
Here, we’ll look at Romney’s claim that “people are 7% poorer now because of Biden’s inflation.”
The inflation rate was 7% in 2021. However, Romney’s focus on inflation alone to assert that Americans are “7% poorer” misses half of the equation: rising income. An unusually rapid rise in wages wiped out much, but not all, of the rise in inflation last year.
“Thinking is incomplete,” said Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank. “That leaves out important context.”
Romney’s office said its comment was based on recently released inflation figures and argued that wage growth varies across different industries, regions and income segments.
Last year’s 7% rise in the consumer price index, the government’s main inflation indicator, was the biggest increase since 1982, when President Ronald Reagan was still in his first term. . Inflation on this scale can be a major economic problem, as it tends to impoverish the typical individual or family, all other things being equal. (There is some variation as to who is hit hardest by rising inflation.)
However, all other things are not equal. Incomes also increase.
If someone’s salary or wages are growing faster than the rate of inflation, they will always be winners. If their wages keep pace with inflation, they won’t be worse off. If not, they will be poorer.
The median American worker was indeed poorer in December 2021 than in December 2020. But Romney’s claim that he was “7% poorer” exaggerated the amount. Wage increases covered about two-thirds of the price increase.
The best measure to assess this comparison, according to economists, is the average hourly wage of all private sector employees. This measure is well suited to verify Romney’s assertion, as it is reported monthly, like inflation data.
Between December 2020 and December 2021, the average hourly wage of private sector employees increased by 4.7%, which is a healthy increase compared to historical norms.
This still meant that the typical American was behind by 2.3%, a notable and disturbing figure. But that’s a fraction of the 7 percent cited by Romney.
Inflation-adjusted salaries “went down slightly, but by much less than 7%,” said Molly Kinder, a fellow at the Brookings Institution.
Other measures paint a similar picture.
A private sector measure, the Pay Scale Index, provides data through the third quarter of 2021. It found that year-over-year wage growth, when adjusted for inflation, was negative by 0.5%.
And an analysis by the Brookings Institution of data reported by 13 major companies (including Amazon and McDonalds) through October 2021 found that workers at 10 of the companies saw wage gains even after controlling for inflation.
Finally, some economists have taken issue with Romney’s term “Biden inflation.” Presidents can impact the economy through the policies they pursue, but a number of factors beyond any president’s control, including the state of the coronavirus pandemic around the world and the difficulties of the chain supply, have played an important role in the acceleration of inflation.
By focusing only on the rate of inflation and not the rise in wages, Romney “assigns 100% of the blame for the negative impact of the price change to the president, while assigning 0% of the credit for the revenue gains to Biden,” Gary Burtless said. , an economist at the Brookings Institution.
Romney said, “People are 7% poorer now because of Biden’s inflation.”
The inflation rate was 7% last year. However, a 4.7% increase in wages reduced the impact on the typical worker by about two-thirds, making Romney’s figure exaggerated.
We evaluate the statement Generally false.
Jon Greenberg contributed to this article.