In the 1992 presidential campaign between former Presidents George H.W. Bush and Bill Clinton, one of the Clinton campaign’s main messages was, “It’s the economy, stupid.”
The phrase, coined by Clinton’s campaign strategist James Carville, quickly caught on and has become a cliché often repeated in American political discourse. Every election cycle, the economy is always polled as one of the issues Americans care about most at the polls.
Unsurprisingly, concerns about the economy are currently top of mind for many American families.
The Daily Citizen spoke with EJ Antoni, a research fellow for Regional Economics in the Center for Data Analysis at The Heritage Foundation. Antoni is also a senior fellow at the Committee to Unleash Prosperity, a former economist at the Texas Public Policy Foundation and holds master’s and doctoral degrees in economics.
“In terms of where we’re at right now, I think it’s pretty clear we’re in a recession,” Antoni told us.
On Thursday July 28, the U.S. Bureau of Economic Analysis will release the 2022 Q2 gross domestic product (GDP) numbers. If the number is negative, we will officially be in a recession, because that will follow the negative Q1 number.
A recession is defined as two straight quarters of negative economic growth.
The Federal Reserve is the U.S. central bank that is tasked with maintaining stable prices and low unemployment. Antoni said regarding the Fed, “I don’t know why anyone puts any faith in the same people who told us inflation was transitory.”
Over the past year, it’s clear the Fed has failed in its first mandate, as inflation hit 9.1% in June 2022.
“It’s insane. For lack of a better word, it’s absolutely insane, the monetary malfeasance of this Federal Reserve,” Antoni said. “I think the shock that a lot of the bureaucrats here in Washington, D.C. had when the 9.1% number came out, points to how incredibly out of touch they are.”
“I don’t think the average American family was surprised by that number, because they’ve been living this out for the past year and a half. They have been experiencing this for a long time. We’ve seen their savings levels go down, their credit card debt go up. We’ve seen prices rise much faster than their incomes have.
“But when you’re a bureaucrat here in D.C., and you don’t have to fill up your gas tank because you’re driven around in a taxpayer-funded, chauffeured vehicle and you don’t even cook your own food, let alone go out to the grocery store and buy it, you are not aware of what food prices are doing. And that’s a huge part of the problem.
“Meanwhile, the common man is absolutely crushed.”
Antoni also spoke to the accuracy of the Consumer Price Index (CPI), which is the government’s official measure of inflation.
He told us that years ago, the U.S. Bureau of Labor Statistics (BLS) changed the way it calculates inflation by minimizing large, sudden changes in housing costs, a category that comprises 33% of the CPI.
According to the BLS, housing costs have increased just 5.6% over the past year. But by many other calculations, housing prices are really up by around 20% or more.
“The CPI should be much higher than 9.1%,” Antoni said. “When you figure that the cost of housing is 1/3rd of the CPI, that would push the CPI well into double digits.”
But regarding the official CPI number, Anoni said, “I don’t see inflation peaking before September. And I think by then, we’re pushing double digits in the CPI.”
All told, families are facing tough times in today’s economy, and that isn’t likely to change soon.
To prepare, Antoni said, “I would not be encouraging people to take huge risks. Your goal right now is basically to preserve real value.”
“Families need to do the best to tighten their budgets, and to try and spend less wherever possible. They need to look for discounts and try to curb their spending.
“None of this is pleasant, but this is the result of the hidden tax of inflation. And if people want it to change, then they need to convey that to those in power who have the ability to change it.”
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Related articles and resources:
Inflation Hits Another Four Decade High of 9.1%, Hitting Struggling Families the Hardest
Getting a Reluctant Spouse Onboard with Budgeting
Money Talk: The ‘You’ in ‘Unity’ is Silent
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