Inflation continues to push up prices for basic goods and services at a rate not seen since the early 1980s. The Labor Department announced Wednesday, on average, prices in December were up 7 percent over the previous year.
The higher prices, on everything from food to gasoline, are negating increasing wages and putting added pressure on the Biden administration and the Federal Reserve to take steps to address the problem.
Testifying before the Senate Banking Committee Tuesday, Jerome Powell, Chairman of the Federal Reserve said, "We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched."
The Biden administration has acknowledged the high consumer price index is making it difficult for many Americans right now, but officials say their policies are beginning to make a difference and say passing the rest of the president's agenda through the Build Back Better bill will go a long way toward making sure the economy continues to rebound and remains strong well into the future.
Republicans say that's exactly what we don't need. They say the soaring inflation is due to the administration and Democrats recklessly pumping money into the economy, such as with the $1.9 trillion American Rescue Plan that Congress passed last March.
“What we know needs to happen is people need to go back to work,” said Rep. Kevin Hern (R-OK1) in an interview Wednesday, “we need to stop this craziness of sending trillions of dollars into our economy. We’ve got a lot of things going on now that we need to start unwinding [and] quite frankly, we’d be in a better spot today if President Biden hadn’t done anything."
Congresswoman Stephanie Bice says she hears complaints regularly from her constituents about the impact of the administration's policies on their pocketbooks.
"We absolutely are, they are really concerned about the price of gas," Rep. Bice said in an interview, "you know, we’ve seen a 60 percent increase in gas prices in a year, food prices are up anywhere from 10 to 15 percent across-the-board."
While the President and Democrats put the blame largely on supply chain issues caused by the pandemic, critics say the real culprit is their overspending.
"The spark on inflation was in March 2021," said Sen. James Lankford Wednesday, "when Democrats dumped $2 trillion into an economy that was already growing, and literally they just threw gas on the fire there, and that greatly accelerated inflation and started this process."
Sen. Lankford welcomes the recognition from Fed Chair Powell that inflation needs to be addressed, but also realizes that means, primarily, raising interest rates, which is also detrimental to certain consumers.
"When they start increasing interest rates to be able to bring inflation down, again that’s a pretty dramatic cost for a long time for a lot of people," said Lankford, "because if you end up with a long-term mortgage, they are locked in on a rate that’s going to be a bad rate for a long time for them."
Republicans say a better solution could arrive this fall.
"What gives me hope," said Rep. Hern, "is that we will have a divided government this fall, that the Republicans will take back the House and the Senate and we will stop this excessive spending."
Another key economic indicator, the Producer Price Index, gets released tomorrow. It measures wholesale prices and was at 9.6 percent in November.