The State of Inflation

It was a really awkward political display.

On Tuesday this week, the Biden administration threw what they called an “Inflation Reduction Party” to celebrate the passage of their most recent spending bill legislative victory — the Inflation Reduction Act. 

I ran through the bill briefly here.

Everyone was there. James Taylor even kicked the event off signing Fire and Rain. (Steamroller Blues might have been a better selection.) 

Nancy Pelosi was gushing all over the place… 

What a thrill it is to be here to celebrate this life-changing legislation, the Inflation Reduction Act,” Pelosi said. “Inflation Reduction Act — so beautifully named.”

Then she thanked the president…

…“for unifying and inspiring a vision of a stronger, fairer, safer future for all — for our children.”

“Your extraordinary leadership has made this glorious day possible.”

So how does this act fight inflation?

From a healthcare angle, it allows Medicare to directly negotiate “certain high-cost prescription drug prices covered by Parts B or D.” 

Sounds reasonable. Except that no one’s feeling any benefits of that for another four years…

The Health & Human Services (HHS) Secretary is authorized to negotiate the prices of 10 prescription drugs in 2026, and another 15 drugs in 2027 and 2028. The number rises to 20 drugs a year in 2029 and beyond.

It also caps out of pocket spending on prescriptions at $2,000 per year — currently the catastrophic cap is a little over $7,000. 

Price caps are never a good thing because someone always has to pay. In this case, once the cap is hit…

…Medicare Part D will pay 20 percent of the cost of brand-name drugs and 40 percent of the cost of generic drugs. Insurers and drug manufacturers will bear the remaining costs. 

Of course you know those costs are getting passed along somewhere else. 

The rest of the bill is basically a bunch of  green energy spending to the tune of $433 billion. As near as I can figure, the green utopia that will be spawned from this spending spree will eliminate current fossil fuel prices that are crushing consumers today. 

So in about 50-or-so years, my grandkids should be thanking the Biden administration for the inflation relief he gave them…

Timing is Everything

You always expect to hear any administration blow their own horns about any kind of legislation they pass for the good of the country. What was really awkward — amazing really — was that someone scheduled this love-fest for CPI day.

In the middle of a 5-alarm inflationary fire burning down our economy.

Headline inflation rose 8.3% year over year (which sent stocks plummeting nearly 4.5%) but the administration boasted before the party that inflation had basically been flat for the past two months — zero and +0.1%.

Well, food prices haven’t been flat the last two months (up 1.1% and 0.8%). Nor has your electric bill (up 1.6% and 1.5%). 

The price of gas has, mercifully, fallen (down 7.75 and 10.6%). And Team Biden would tell you this is a direct result of his tapping 180 million barrels of oil from the Strategic Petroleum Reserve like it was the Social Security or Medicare funds. But really you already know what’s behind the decline in gas prices…

The Biden administration will be having a field day touting that their release from the Strategic Petroleum Reserve has beaten back Putin’s price hike and saved the day.  But the truth is, it’s been nothing of the kind.

The reality?  In the face of massive price hikes, people have altered their driving habits. From AAA

New survey data from AAA finds that drivers are making significant changes to cope with record pump prices. Almost two-thirds (64%) of U.S. adults have changed their driving habits or lifestyle since March, with 23% making “major changes.” Drivers’ top three changes to offset high gas prices are driving less, combining errands, and reducing shopping or dining out.

Everything else is still costing more. Which led to another stark revelation…

Headline CPI was up .1% from the previous month while CORE prices (CPI minus those pesky food and energy prices) actually rose .6%! When you take out the two most volatile commodities and see the rate of inflation go up, it’s telling you one thing…

That inflation has become way more broad based.

Here’s a look at the numbers the BLS presented this month…

Producer Prices are Seeing Some Relief, But…

Later in the week, the Producer Price Index was released. It showed things cooling a bit too. 

Producer Price Index (Y-o-Y)


To be sure, it is a positive to see the trend moving down since March. But the print for the month was still UP 8.7%.

And importantly, it was above the CPI’s 8.3% print. 

I wrote a couple weeks back, that producer prices have been exceeding consumer prices for some time.

For the past year and a half, producer prices have been significantly outpacing consumer prices. In other words, as bad as it’s been for you, businesses have actually been bearing the brunt of this inflation throughout most of the last year and a half.

As of this month, PPI inflation has now outpaced consumer prices for 20 consecutive months. And it is still hitting businesses’ bottom lines.

A Solution for All Our Inflation Woes

So probably the best news that we can dig out of all this is that the economy has finally begun to adapt to the months of higher prices — at least where gas is concerned. Unfortunately for everything else, you gotta buy what you gotta buy. 

I did come across a (possibly new?) inflation report this week. I’ll be honest, I can’t recall seeing it (or even hearing of it) before. 

The July print, which appears to be the most recent, showed inflation rose a mere 6%.

But in the interest of curiosity, I thought I’d share it with you this week… 

CPI “Core Core”


According to, “core core” inflation excludes food and energy… and shelter and used cars and trucks.

The BLS publishes a line item for what they call their “core” inflation number. You can see it in the table above. (“All items less food and energy.”)  No line item, however, for the “core core” number.

It makes me wonder if we’re about to get introduced to another important measure of inflation in the near future?

But if they’re going to do that, why not just exclude apparel and medical care?

They’d have inflation licked!

Make the trend your friend,

Bob Byrne
Editor, Streetlight Confidential