Inflation in the US: What is Happening and How Alarmed Should Americans Be?

The US Bureau of Labor Statistics unveiled gloomy numbers in the middle of November, showing that prices in America were 6.2% higher year-on-year in October, hitting a 30-year-high.

The United States has seen a dramatic soar in prices in October - something that did not go unnoticed by the critics of the Biden administration, especially in light of the US President aiming for ambitious social and climate spending under the Build Back Better agenda.

US Inflation Overview

US prices rose 6.2% in October compared to the same time period last year, with the energy sector experiencing the sharpest increase, as, according to Consumer Price Index (CPI), prices have skyrocketed 30% there.

Regular customers can see that for themselves at American gasoline stations: the average price of a gallon of gas was estimated by the AAA monitoring service to be some $3.40 as of Wednesday, compared to around $2.10 in November 2020. According to President Biden, this could be partially blamed on gas companies "pocketing" money.

"If the gap between wholesale and retail gas prices were in line with past averages, Americans would be paying at least 25 cents less per gallon right now," he said on Tuesday.

However, it's not only about the gasoline prices.

With the holiday season looming, it may be difficult for some Americans to prepare a Thanksgiving dinner, as reports reveal that the traditional holiday meal will cost some 14% more than it did last year. The American Farm Bureau estimated that "Thanksgiving inflation" is even higher than the overall increase in the cost of food. An NBC anchor even suggested something she herself admitted may be controversial: forgoing turkey, even though it is the staple of the Thanksgiving meal.

NBC’s tips on dealing with inflation. “If you don’t get a turkey fewer people might come and that would save you more money also” 😂😂😂 pic.twitter.com/oiRrTEGEHv

— Walter Piecyk (@WaltLightShed) November 20, 2021

Adding up to the pile, the American chain store Dollar Tree moved to raise its price point from $1 to $1.25, in a decision that appears to slightly undermine its naming. Company CEO Michael Witynski said that the decision was motivated by the current inflationary economic environment.

In an attempt to buffer the impact of inflation, the US Federal Reserve announced in early November that it will be tapering the massive coronavirus stimulus programme amid fears that central banks may have to raise rates.

Biden's Optimism

While President Biden has acknowledged that the situation with soaring inflation is "worrisome", he continues to insist that the US economy remains strong enough to weather the storm and reminds that the country is still in the middle of the fight with the coronavirus pandemic.

"Even after accounting for inflation, our economy is bigger and families have more money in their pockets than they did before the pandemic. America is the only major economy in the world that can say that," Biden tweeted on Tuesday.

We are experiencing the strongest economic recovery in the world.

Even after accounting for inflation, our economy is bigger and families have more money in their pockets than they did before the pandemic.

America is the only major economy in the world that can say that.

— President Biden (@POTUS) November 23, 2021

Earlier, the US president ordered the release of 50 million barrels of oil from the Strategic Reserve. The move, coordinated with other energy-consuming countries like China, India, Japan, South Korea and the UK, is apparently aimed to tackle the skyrocketing gasoline prices by lowering oil prices. Still, despite the release, US energy stocks ended up being mostly higher on Tuesday.

Some experts, however, believe that the inflation will subside as soon as the coronavirus pandemic goes away, reminding people that things could actually be worse.

“My baseline scenario is that as the pandemic is contained, which is happening as we get more vaccines out there, we will see inflation move back down to something that is very close to before Covid,” Claudia Sahm, a senior fellow at the Jain Family Institute and a former Federal Reserve economist, said, cited by The Guardian. "It really is upsetting to pay more for your groceries, but it’s really upsetting not to be able to walk home with the groceries in your cart.”

Backlash at the Administration

Not everyone shares the optimistic sentiment. With the prices for Thanksgiving meals and gasoline soaring, critics have lashed out the Biden administration, reminding the President of his sweeping spending plan and how it may possible make things worse.

Turkey prices? Up 24%
Pie crusts? Up 20%
Russet potatoes? Up 16%
Dinner rolls? Up 15%
Cranberries? Up 11%
Gravy? Up 9%
Sweet potatoes? Up 4%

— Rep. Jim Jordan (@Jim_Jordan) November 23, 2021

As the US federal debt held by the public in 2020 reached 100% of gross domestic product for the first time since World War II, according to Congressional Budget Office estimations, additional concerns pile up in regard to Biden's Build Back Better agenda.

Commenting on the soaring inflation, Senate minority leader Mitch McConnell said that it is "a direct result of flooding the country with money".

Former US President Donald Trump also weighed in on the criticism of the Biden administration, particularly grilling Biden's decision to release oil from the Strategic Reserve.

"We were energy independent one year ago, now we are at the mercy of OPEC, gasoline is selling for $7 in parts of California, going up all over the country, and they are taking oil from our Strategic Reserves. Is this any way to run a Country?", he said.