News from the Bureau of Labor Statistics (BLS) that February’s all-item Consumer Price Index (CPI) skyrocketed 7.9 percent on a year-over-year basis came as no surprise to American consumers. It was the largest increase since 1982 and followed increases exceeding 6 percent each month since September. Anyone who does the family shopping, as I do, or who keeps the family SUV or pickup truck full of gas has been seeing this coming for almost a year.
Expressing concern about soaring gasoline prices, President Joe Biden called it “Putin’s price hike.” While shifting the blame for inflation to a foreign despot may be attractive politically, the BLS report tells us that the price surge had nothing to do with Russia’s invasion of Ukraine on February 24, too late to have much impact on the monthlong survey of daily gasoline prices.
The BLS report showed the food index was up 7.9 percent for the year and, yes, gasoline was up 37.9 percent. It may be worth remembering that the U.S. average price of a gallon of gas in January 2021 was $2.38; in January 2022, the price was about a dollar higher at $3.32. By March 10, the price was another dollar higher at $4.31. Yes, Putin’s invasion is making a huge difference. But demand for gasoline surged much earlier when consumers, with money in the bank and uninterested in flying because of COVID-19 concerns, put family cars on the road in the midst of the great COVID shutdown, making the number of miles traveled in spring 2021 rise to new heights.
For too long now, our political leaders have been unwilling to accept the notion that their policies are the major source of inflation, that the inflation embedded in our economy is not transitory, that inflation is not just associated with sudden supply chain problems, and that inflation is not caused by business leaders suddenly becoming unusually greedy. Few have admitted inflation is created in Washington, here to stay, and likely to worsen over the next 12 months.
Many analysts (and even Biden’s Council of Economic Advisers) now recognize that, fed by trillions of stimulus dollars distributed in 2020–21, surging consumer demand placed extraordinary pressures on the straining supply of home appliances, automobiles, residential structures, gasoline, paint, and even cat food. With money flooding and consumers shopping, prices had to sail higher.