President Joe Biden has been called out for claiming in CNN and Yahoo! Finance interviews that the annual inflation rate was 9% when he arrived at the White House in January 2021. This is, of course, false because the data show that the consumer price index (CPI) was 1.4% at the time. White House officials have been performing damage control, telling the press that he meant the factors were in place for inflation to accelerate to its highest level in four decades. But the mendacity to shield the lie is just as incorrect.
Inflation Forecasts in 2021
As the United States entered the second year of the coronavirus pandemic and the beginning of a new presidency in the nation’s capital, the White House, the Federal Reserve, and a plethora of mainstream economists did not anticipate the country to endure a severe bout of inflation.
Entering 2021, the Federal Reserve’s Summary of Economic Projections forecast that the personal consumption expenditures (PCE) price index, which is the institution’s preferred inflation measurement, would be 1.8% that year and then inch higher to 1.9% in 2022. Even as the annual inflation rate was starting to climb, St. Louis Fed Bank economists dismissed the trend and projected that the PCE would top out at 2.4% and then slide to 1.4%. When these estimates failed, the talking point from the Eccles Building was that inflation was transitory, meaning that it would pop for a bit and stabilize toward the central bank's 2% target.
San Francisco Fed President Mary Daly rejected inflation concerns as "the tug of fear" in March 2021. In August 2021, Fed Chair Jerome Powell started repeating the term “transitory,” telling the Jackson Hole symposium: "From long experience, we expect the inflation effects of these increases to be transitory.”
What about experts in the private sector? According to the Philadelphia Fed's survey of 36 forecasters in May 2021, the median inflation outlook for 2021 was 2.3%. Additionally, they penciled in a 0.5% chance of inflation surpassing 4%. Morningstar economists forecast the PCE to run 2.3% in 2021. S&P Global's economic outlook suggested that core PCE inflation, which omits the volatile energy and food categories, would average 2.1% in 2021 and 1.9% in 2022. Scotiabank penciled in inflation coming in at 2% in 2021 and 2.5% in 2022.
As for the incoming administration, officials averred in the opening months of 2021 that inflation would not be a problem.
In the spring of that year, Treasury Secretary Janet Yellen explained at a virtual event hosted by The Atlantic that she did not anticipate inflation troubles brewing. "I don't think there's going to be an inflationary problem. But if there is, the Fed will be counted on to address them," she noted. A month later, Yellen stated at a G7 conference involving finance ministers that she did not believe some of the inflationary pressures would be "permanent," forecasting inflation would be "maybe around 3%.” President Joe Biden also espoused that price increases would be temporary, saying from the White House in July 2021 that "we're confident" the United States is not experiencing "unchecked inflation in the long term."
Interestingly enough, consumers possessed superior forecasting abilities to the smartest men and women in Washington and Wall Street. The University of Michigan's one-year inflation outlook was 3.3% in February 2021, while the New York Fed's year-ahead inflation estimate was trending higher heading into 2022. It is comparable to the classic William F. Buckley quote, "I'd rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard."
The Truth Will Out
From Press Secretary Karine Jean-Pierre to White House economist Jared Bernstein, senior administration officials are urging the public to ignore their lying eyes. The president did not mean to say that inflation was 9% in January 2021. Instead, Biden’s foresight, vast intellect, and wit helped him realize that the tenets of Bidenomics were vital to employ because the CPI or the PCE would rocket from what he inherited. Based on the treasure trove of projections and statements emanating from the White House and Wall Street in 2021, inflation blindsided these folks. Well, Liberty Nation had warned about it long before the mainstream media became wise to the fact that inflation was far beyond transitory.
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