Poor Americans Hurt the Most by Inflation in 2021 and 2022, Fed Report Says
Low-income households, young Americans and individuals with less education were most at risk. inflation According to reports by the, they are more than any other categories. Federal Reserve Bank of New York.
The regional central bank’s economists published two studies in this month which assessed inflation disparities based on income, age and race. From June 2022 to early 2021, those who spent the largest portion of their earnings on housing, food, and transportation felt the most inflationary pain.
The first report It was discovered that middle-income blacks, Hispanics and Hispanics were under financial pressure because they devoted more of their spending on transportation.
“This pattern is largely because a greater share of these groups’ expenditures is devoted to transportation, particularly used cars and motor fuel, categories that led the 2021 inflationary episode. However, over the last five months, as transportation inflation has declined, these gaps have declined as well,” The report authors stated.
June saw gasoline prices peak at $5.01 per gallons. Since then, they have plummeted 32 percent.
The used cars-and-trucks index rose to a peak last year at 27%. Recent Bureau of Labor Statistics data shows that the index fell 8.8 percent in December 2022, compared to the previous year.
New York Fed separate report Published by Liberty Street Economics on their blog, inflation disparities among young and less educated Americans were discovered because they spent a substantial portion of income on used cars or motor fuel.
This was especially true for rural households, where prices were higher than in urban areas.
Researchers concluded that these inflation gaps are closing. “transportation inflation converges toward average inflation.”
The latest Consumer Price Index (CPI) report New vehicles fell 0.1 percent monthly, while used cars and trucks dropped 2.5 percent, gasoline declined 9.4 per cent, and transportation services edged up 0.2%.
Yet, the U.S. low-income households remained strong “above-average inflation because of their higher proportional spending on food and housing, categories for which prices were rising more rapidly at the time.”
Inflation was a problem for the bottom 40% of households based on income. New York Fed economists pointed out that low-income households were most affected by the inability to substitute for cheaper goods and lower cash reserves.
“As of December 2022, the bottom 40 percent have the highest year-on-year inflation rate of the three groups, and the inflation rate of the middle-income group is below the national average,” According to the report. “It is likely the case that the same rate of inflation represents a greater welfare loss for lower-income than higher-income households because of the former’s lower capacity for substituting to less-expensive goods, greater liquidity constraints, and larger marginal utility of real income.”
Are the Rich and Poor at Risk from Inflation?
It was obvious that rampant inflation in price became more than “transitory,” Officials from the White House and left-leaning economists said that inflation was a problem only for the wealthy.
Jason Furman is a Harvard professor and chair of Council of Economic Advisers. tweet The majority of the economic problems facing the United States, including inflation and supply chain challenges, are not related to inflation. “high-class problems.”
This tweet was endorsed Ron Klain, White House Chief of Staff.
Jen Psaki was a former White House press secretary dismissed As a result, the supply-chain crises “the tragedy of the treadmill that’s delayed.”
Paul Krugman, an economist who writes a column in The New York Times, refutes the notion that inflation is affecting lower-income Americans.
“‘Inflation especially hurts the poor’ has truthiness—it sounds like it should be true. But I don’t see either evidence or a mechanism,” He wrote in a tweet December 2021
These ideas were also featured in headlines on mainstream media outlets as well as left-leaning blogs.
CNN told Its readers in December 2021 “inflation can actually be good for everyday Americans.” The Intercept also offers this option. noted That “inflation is good for you.”
Others believe that inflation causes a lot of damage to the poor.
“High inflation, in short, tends to worsen inequality or poverty because it hits income and savings harder for poorer or middle-income households than for wealthy households. Households that have recently escaped poverty could be pushed back into it by rising inflation,” wrote Brookings Institution economists Indermit Gil and Peter Nagle
William Anderson is a Frostburg State University professor emeritus in economics and editor at The Mises Institute. stated that inflation had benefited billionaires because the Federal Reserve’s monetary expansion resulted in dramatic gains in the stock market in 2020 and 2021.
Criticists of the claim that inflation only affects the affluent assert that higher prices equal less spending, saving and investing.
Consumer surveys also revealed that most households are willing to go to extreme lengths to stay afloat in the current inflationary environment.
A September NPR/PBS Newshour/Marist poll revealed that 40 percent of respondents were driving less to save on gas, 39 percent cut back on food or groceries, and 20 percent skipped a doctor’s visit or buying prescription drugs.
LendingTree can also be used. survey It was found that nearly two-thirds (63%) of consumers are concerned about being able to afford groceries due inflation. According to The New York Times: More consumers are worried about being able to afford groceries due inflation. using “buy now pay later” Service to purchase groceries
“The fact that there’s a large number of Americans that simply can’t afford to buy food highlights the desperation that this economic climate creates,” Marshall Lux is a fellow at Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. told CNBC. “Once people start stretching out grocery payments it shows the height of personal desperation.”
Nearly one-third of U.S. households believe their financial situation will worsen over the next year, according to the New York Fed’s Survey of Consumer Expectations. The economy is still experiencing inflation pressures, particularly for essential items. 2023 could be difficult for Americans of low and middle income.
Recent study According to The Heritage Foundation, the average American family has lost $7,400 in the past year. This is due to an increase in consumer staples.
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
*As an Amazon Associate I earn from qualifying purchases
Now loading...