The economy continues to worsen, as inflation remains high, interest rates rise, and activity has declined for two consecutive quarters. The labor market offers some good news, although there are already forecasts estimating an unemployment rate of 5.6% in 2023 (Bank of America).
All of this has an impact on American families' incomes. EJ Antoni, a researcher at The Heritage Foundation's Center for Data Analytics, has calculated how much an American citizen has lost on average since Joe Biden became president in January 2021.
Inflation
The main reason for the decline in Americans' quality of life is inflation. Price increases have steadily been on the rise, reaching 9.06% in June. By then, the Federal Reserve had begun their interest rate hike policy, but inflation is reluctant to come down.
Although the analysts' consensus was that the annual inflation rate would correct itself down to 7.7% in August, the final figure was significantly higher at 8.26%. Since Joe Biden came to power, prices have continued to increase up to 12.7%, representing a loss of purchasing power equivalent to $3,000 per person.
Interest rates
Precisely, the increase in interest rates is another reason why Americans have lost purchasing power. Interest rates were at 0.25% at the beginning of the current year. In May, they had risen to 1% and since then they have begun to climb up to rates of between 3.0-3.25%. The Heritage Foundation estimates that this represents a loss in purchasing power of another $1,200 per year.
EJ Antoni points out who is to blame for this situation:
This financial catastrophe for American families is the direct result of a president and Congress addicted to spending our money, combined with a Federal Reserve that complacently enables this addiction by printing more dollars. Washington recklessly spent trillions of dollars it did not have and paid for it with newly printed money, causing rampant inflation that has destroyed people's purchasing power and jeopardized Americans' financial future.
The economist notes that "Many Americans have taken on more debt to meet the rising cost of living. Now, the Fed is finally fighting inflation, which is driving up interest rates and increasing funding costs."
In other words, public spending has risen sharply during this time, financed by the Fed's lax monetary policy. When inflation hits, it is necessary to deal with past excesses. Citizens are the ones who are paying for the White House and the Federal Reserve's management.
