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• The inflation rate was 7% over the past year. However, a 4.7% increase in wages has reduced the impact on the typical worker by about two-thirds, making Romney’s figure exaggerated.
With the highest inflation rates in decades weighing heavily on the minds of many Americans, both Republicans and Democrats have been waging a messaging war about how good, or bad, the economy really is.
On the Jan. 16 edition of NBC’s "Meet the Press," Sen. Mitt Romney, R-Utah, took a shot at President Joe Biden’s stewardship of the economy and other matters of state.
"He's had a bad year," Romney, the GOP’s 2012 presidential nominee, said of Biden. "He's had 52 weeks of bad weeks. I mean, people are 7% poorer now because of Biden inflation. Gasoline prices are, what, 50% higher than they were when he took office. The border is a mess. COVID was resurgent, but he didn't have in place the tests people needed to keep themselves safe. And then, of course, there was the disaster in Afghanistan. Russia's now threatening Ukraine. Things are not going well."
Here, we’ll look at Romney’s assertion that "people are 7% poorer now because of Biden inflation."
The inflation rate was 7% during 2021. However, Romney’s focus on inflation alone to claim that Americans are "7% poorer" leaves out half of the equation: rising incomes. An unusually rapid rise in wages erased a lot of, although not all of, the inflation bump last year.
"The thought is incomplete," said Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank. "It leaves out important context."
Romney’s office said that his comment was based on the recently released inflation numbers, and argued that wage growth varies across different industries, regions and income segments.
Last year’s 7% rise in the Consumer Price Index, the government’s main inflation indicator, was the biggest increase since 1982, when President Ronald Reagan was still in his first term in office. Inflation on that scale can be a major economic problem, because it tends to make the typical individual or family poorer, all other things being equal. (There is some variation in who gets hit hardest by rising inflation.)
However, all other things are not equal. Incomes go up, too.
If someone’s salary or wages go up faster than the inflation rate, they’ll still come out ahead. If their pay keeps pace with inflation, they’ll be no worse off. If it doesn’t, then they will be poorer.
The median American worker was indeed poorer in December 2021 than in December 2020. But Romney’s claim that they were "7% poorer" exaggerated the amount. Rising wages covered about two-thirds of the rise in prices.
The best measure to evaluate this comparison, according to economists, is average hourly earnings for all private employees. This measurement is well suited for checking Romney’s assertion, because it’s reported monthly, like the inflation data.
Between December 2020 and December 2021, average hourly earnings for private employees rose by 4.7%, which is a healthy increase by historical standards.
That still meant the typical American fell behind by 2.3%, a notable and worrisome figure. But that’s a fraction of the 7% that Romney cited.
Inflation-adjusted wages "have declined slightly, but by significantly less than 7%," said Molly Kinder, a fellow at the Brookings Institution.
Other measures paint a similar picture.
A private sector measure, the Payscale Index, provides data through the third quarter of 2021. It found that year-over-year wage growth, once adjusted for inflation, was negative 0.5%.
And an analysis by the Brookings Institution of data reported by 13 large companies (including Amazon and McDonalds) through October 2021 found that workers at 10 of the companies saw wage gains even after accounting for inflation.
Finally, some economists took issue with Romney’s term "Biden inflation." Presidents can have an impact on the economy through the policies they pursue, but a number of factors beyond the control of any president, including the status of the coronavirus pandemic globally and supply-chain difficulties, have played a significant role in accelerating inflation.
By focusing only on the inflation rate and not rising wages, Romney "is attributing 100% of the blame for the negative impact of price change to the president, while assigning 0% of the credit for the income gains to Biden," said Gary Burtless, a Brookings Institution economist.
Romney said, "People are 7% poorer now because of Biden inflation."
The inflation rate was 7% in the past year. However, a 4.7% increase in wages reduced the impact on the typical worker by about two-thirds, making Romney’s figure exaggerated.
We rate the statement Mostly False.
Jon Greenberg contributed to this article.
Mitt Romney, remarks on NBC’s "Meet the Press,", Jan. 16, 2022
Federal Reserve Bank of St. Louis, "Average Hourly Earnings of All Employees, Total Private," accessed Jan. 20, 2022
Federal Reserve Bank of St. Louis, "Employment-Population Ratio," accessed Jan. 20, 2022
Federal Reserve Bank of Atlanta, wage tracker, accessed Jan. 20, 2022
Payscale Index, accessed Jan. 20, 2022
Brookings Institution, "With inflation surging, big companies’ wage upticks aren’t nearly enough," Dec. 13, 2021
Associated Press, "Inflation jumps 7 percent, the biggest increase since 1982, as Americans increase spending," Jan. 12, 2022
Associated Press, "Wages jump by the most on records dating back 20 years," Oct. 29, 2021
Email interview with Gary Burtless, senior fellow at the Brookings Institution, Jan. 18, 2022
Email interview with Tara Sinclair, economist at George Washington University, Jan. 18, 2022
Email interview with Dean Baker, co-founder of the Center for Economic and Policy Research, Jan. 18, 2022
Email interview with Molly Kinder, fellow at the Brookings Institution, Jan. 18, 2022
Interview with Douglas Holtz-Eakin, president of the American Action Forum, Jan. 18, 2022
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