August 20, 2024
A couple of decades ago a candidate for Copenhagen’s city council ran on a platform that if he won, the wind would always be at bicycle riders’ backs. In a country where many people use bicycles for commuting and shopping, this was an attractive promise. The proposal was put forward as a joke by a comedian running a farcical campaign for office. In the U.S., the media would likely have taken the idea seriously.
This is pretty much what we have in the continuing drumbeat of inflation stories where reporters acknowledge that inflation has fallen back to its pre-pandemic pace, but then tell us that “prices are still high.” While we would all like to pay less money for food, clothes, and other items, wages are 23 percent higher than before the pandemic. (Prices have risen 20 percent.) The idea that prices will somehow fall back to where they were four and a half years ago makes about as much sense as saying the wind will always be at bicycle riders’ back.
To be clear, there is some room for price declines or at least for inflation to lag wages by more than usual. Profit margins did increase in the pandemic, and it would be reasonable to expect that margins would shrink as the economy returns to normal. But the reduction in margins would be reducing prices by 1-2 percentage points, not returning prices to their pre-pandemic levels or anything close to them. (There may be larger declines for some items.)
The real question is why would people come to believe that something so obviously absurd is plausible? I’m sure that no one in Copenhagen went to the polls thinking that the comedian candidate was going to ensure that the wind was always at their back, why do people in the United States somehow think it makes sense that prices would fall back to their pre-pandemic level?
I can’t monitor people’s thought processes, but I do remember back to our last serious bought of inflation in the 1970s and 1980s. I do not recall anyone discussing the idea that prices would fall back to the levels they were at before inflation took off.
I’m sure there were some number of people in the country who thought something like that, but if a reporter doing a person on the street interview came across them, they likely would have thanked them for their opinion and gone on to find someone with a minimal grasp of economics. Then, as now, it simply was not plausible that prices were going to fall back to some prior level, in the absence of a catastrophic depression that sent wages tumbling. Since that was not in the cards, and almost no one wanted to see a catastrophic depression, public discussion focused on getting the rate of inflation down to an acceptable level.
However, that has not been the story of coverage of inflation under Biden. When inflation was high in 2021 and 2022 reporters anxiously highlighted the situations of people who consumed extraordinary amounts of whatever item (e.g. milk and gas) was rising rapidly in price. They also rarely mentioned government programs, like the expanded child tax credit, which would substantially or completely offset the impact of higher prices.
As inflation has come down and wage growth again outpaced prices the media have fixated on the assertion that people are upset that prices have not come back down. I assume that no one who reports on politics for a major media outlet is so ignorant to think that this is a plausible story. The question then is why do they keep feeding it by repeating the complaint endlessly like it is a serious way to talk about the economy?
We then get political figures like President Biden and Vice-President Harris who are pressed on why they can’t do the impossible. I suppose it would be bad politics, but they really should tell any reporter posing a question about prices still being high to go learn a little bit of economics and then come back and ask a more serious question.
Unfortunately, the media are dominated by unserious reporters who ask unserious questions which gives us an absurd national debate about bringing about the impossible. If the Danish comedian had run for office here, given the state of our media, he might have won.
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