"Economists warn of inflation inequality in 2022"

" \n Economists warn of inflation inequality in 2022 \n \n\n \n The coronavirus pandemic has led to a new era of inflation inequality, economists warn, in which poor households bear the brunt of rising prices. \n \n\n \n That\u2019s because a bigger portion of their budget goes toward categories that have spiked in cost. Food is up 6.4% over the past year, for example, while gasoline jumped a whopping 58%. And now many people are facing those higher prices as federal stimulus programs fade away. \n \n\n \n \u201cThey\u2019re essentially looking to stretch a dollar most days,\u201d said Chris Wimer, co-director of the Center on Poverty & Social Policy at Columbia University. \u201cIt\u2019s going to lead to difficult choices between putting gas in the car or paying for your kids\u2019 child care or putting food on the table.\u201d \n \n\n \n A recent analysis by the Penn Wharton Budget Model found that low- and middle-income households spent about 7% more in 2021 for the same products they bought in 2020 or in 2019. That translates into about $3,500 for the average household. \n \n\n \n By contrast, spending by wealthy households went up by only 6%. \n \n\n \n Shift in spending for the wealthy \n \n\n \n This disparity is typical during inflationary periods, said Kent Smetters, who directs the Penn Wharton model. But since the 1980s \u2014 the last time prices rose this quickly \u2014 higher-income households have shifted more of their spending away from goods and toward services. For example, in 2020, food was 12.7% of the budget for the top 5% of households, compared with 16% of the budget for the bottom 20%. \n \n\n \n Meanwhile, pandemic-related production disruptions have driven up the costs of commodities that poor households rely on. \n \n\n \n \u201cWhat they happen to be buying has been hit harder by the supply crunch,\u201d Smetters said. \u201cIt\u2019s broader-based than in the past.\u201d \n \n\n \n The findings dovetail with an analysis of credit and debit card data by Harvard Business School economist Alberto Cavallo at the start of the pandemic. He showed that low-income consumers experienced price increases that were roughly double those of wealthier ones. \n \n\n \n In 2019, a joint paper from researchers at Columbia and the London School of Economics estimated that about 3 million more people would qualify as living in poverty if their incomes were adjusted for the inflation rates they experience. \n \n\n \n Experts now fear that poverty will rise in early 2022 as pandemic-related federal benefits phase out and President Joe Biden\u2019s sweeping social spending package languishes in Congress. Of particular concern is the end of monthly payments of the child tax credit, which provided families with $300 a month for each child younger than 6 and $250 for older kids. \n \n\n \n Read: Ghana Armed Forces investigates \u201cbomb scare\u201d incident at Kotoka Airport \n \n\n \n Worry over ending tax credits \n \n\n \n According to Columbia, the benefit kept nearly 4 million children out of poverty. The last monthly check was issued Dec. 15. \n \n\n \n \u201cYou see a pretty clear impact of those payments,\u201d Wimer said. \u201cWe\u2019re obviously all worried about January.\u201d \n \n\n \n But Republicans fear just the opposite: That more money from Washington will lead to even higher inflation, placing a bigger burden on the poor. \n \n\n \n \u201cThere are some provisions in this bill that maybe we could have a bipartisan agreement on once inflation calms down,\u201d Sen. Lindsey Graham, R-S.C., told reporters earlier this month. \u201cBut right now is not the time to add any more federal spending, growing the government, creating a problem for inflation.\u201d \n \n\n \n That argument appears to have swayed Sen. Joe Manchin, D-W.Va., who has raised alarms about the cost of the child tax credit if it were continued over the decade. He has pushed for tighter limits on the benefit and work requirements for other social programs in the package. Without his vote in the evenly split Senate, Democrats cannot pass the bill. \n \n\n \n \u201cThere\u2019s a case to be made that tax credits are very necessary \u2014 that if we weren\u2019t dealing with inflation, these are certainly a way to support the disadvantaged,\u201d said Gustavo Flores-Macias, associate professor at Cornell University. \u201cBut the political timing is poor because of inflation.\u201d \n \n\n \n There is one bright spot for low-wage workers: They have received some of the biggest pay raises of the pandemic, helping to buffer the rise in prices. As of November, median wage growth over the past year has averaged more than 5% for the bottom quartile, according to the Federal Reserve Bank of Atlanta. Meanwhile, average wage growth for the top 25% has slowed this year to just 2.7% as of November. \n \n\n \n \u201cThis is not a crisis of scarcity. It\u2019s a crisis of everyone having more than what the market can currently supply,\u201d Samuel Hammond, director of poverty and welfare policy at the Niskanen Center. \u201cIf we want robust economic growth, we are probably going to have to tolerate higher inflation and rising commodity prices because that is a side effect of booming consumer spending and investment.\u201d \n "

"Economists warn of inflation inequality in 2022"

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