Is inflation a serious problem that could damage the economy for several years, or will its effects dissipate before early next year? There are major economists on each side of the debate. These include the chair of the Board of Governors of the Federal Reserve System, Jerome Powell, and Treasury Secretary Janet Yellen. The two of them make the same argument: inflation will last no longer than into late next year. Enough people are looking for jobs, their argument goes, that wages will not rise substantially.
Prominent economists who argue otherwise include former Treasury Secretary Lawrence Summers, who is a well-regarded economist. He said the assumption that inflation could be tamed was false. Government spending to help build jobs after the 2020 recession, and more proposed by the Biden administration, would fund a surge in consumer spending. Troubled supply chains would mean many goods would be in low supply. The formula for sharp inflation is already in place, Summers argues. To make matters worse, he added, many people who left the labor force have retired and will not be back. The “too many workers” view is a myth.
The Bureau of Labor Statistics’ Consumer Price Index for September supported the alarms of people who believe in the view Summers takes. What consumers pay for goods and services rose 5.4% on an unadjusted basis, compared to September 2020. For some Americans, the numbers were worse.
Take the basics that most people pay money for each month. In September, the price of beef steak rose 22% from the same month last year. The prices of several other types of meat rose by 12% to 19%. Apples rose over 7%, as did chicken. Other notable increases were juices and non-alcoholic drinks, up nearly 4%.
At the other end of the spectrum, some items remained cheap by the standards of an inflationary world. Among the few items that posted a drop in price from August to September was butter, which was down 1.3%. The price of shellfish fell by the same number. Frankfurter prices declined 1.2%. Frozen vegetables decreased by 1.0%, as did cheese.