Lauren C. Moye, FISM News
Americans have lost the equivalent of $4,200 of their annual wages under historic inflation and rising interest rates since President Joe Biden took office, according to Heritage Foundation experts.
The moderately conservative public policy think tank released the new assessment on Thursday. The number is the sum of calculations of how the latest inflation and interest rate statistics impact purchasing power.
“Consumer prices have risen 12.7% since January 2021, significantly faster than wages, so that the average American worker has lost $3,000 in annual purchasing power,” Heritage reported.
Rising interest rates have also resulted in a $1,200 purchasing power reduction, leading to its total prediction of $4,200 in loss for the average U.S. citizen.
Interest rates originate from the Federal Reserve, which has been raising rates in an effort to bring astronomical inflation levels back down. However, each rate hike increases loan borrowing costs. This means that home mortgage rates, vehicle loans, and credit cards also see higher loan rates that reduce the overall purchasing power of American wallets.
Last week, the Fed raised fund rates an additional .75 points which sent Wall Street into turmoil. The central bank indicated at that meeting that they also expect to raise the rates a total of 1.25% through two more hikes by the end of this year.
The move followed a worse-than-expected Labor Department consumer price report that showed another increase in food costs, rent, electricity, and healthcare during August. From July, food costs rose 0.8%. Owners’ equivalent rent, which measures the rental value of a property, and healthcare costs increased by 0.7%,
Meanwhile, mortgage rates passed the 6% benchmark for the first time since the housing crisis of 2008. Since that point, mortgage buyer Freddie Mac stated that the 30-year rate has once again climbed to 6.29%. Those numbers will go higher if the Fed follows through with its planned rate increases.
Heritage economic researcher EJ Antoni noted how American citizens are the ones suffering from the decisions made in Washington:
Simply put, working Americans are $4,200 poorer today than when Biden took office. 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 compliantly enabling this addiction by printing more dollars.
While the Fed is trying to combat inflation, the rate hikes now cut Americans even more. This is especially true when factored alongside the additional debt that average Americans took on amid rising inflation.
“We are in a vicious spiral, but it’s one of Joe Biden, the Democrat-controlled Congress, and the Fed’s own making,” Antoni said.
Democrats have spent around $3.8 trillion during Biden’s administration. This includes the $1.9 trillion American Rescue Plan (ARP) and the recent $430 Inflation Reduction Act (IRA). Republicans warned that the ARP would cause inflation when they originally stood opposed to its’ passing. Meanwhile, the IRA is not anticipated to significantly reduce consumer costs, and may in fact lead to an increase in immediate inflation.
While a reduction in spending power is bad news in and of itself, the rate hikes are also expected to cause greater unemployment in America. CBS News reported that an additional 1.2 million people will lose their jobs due to the Fed rate increases, with a projected increase from 3.7% unemployment today to 4.4% by the end of the year.
Sen. Elizabeth Warren (D-Mass.) tried to shift the blame away from her party, criticizing Federal Reserve Chair Jerome Powell on Twitter, “Destroying jobs and crushing wages of millions of workers is reckless and dangerous. Recession is not the solution to inflation.”
Republicans, including Rep. Tom Emmer (Minn.), have a different message.
We cannot spend our way out of this inflation crisis.
— Tom Emmer (@RepTomEmmer) August 17, 2022
The August tweet from the Minnesota congressman simply highlights that Republicans believe that the majority of the inflation crisis circles back to reckless spending by the Biden administration throughout his tenure.
Inflation is also of high concern for the general public as midterms loom on the horizon. Cost of living ranks second while jobs and economy came in at third for Americans’ greatest concerns in a recent NBC poll.