Economist Says Inflation is Hitting Lower Income People The Most
On Wednesday, Internationally Renowned Economist Michael Klein appeared on KGVO’s Talk Back show to discuss inflation and energy costs in the U.S. He first focused his efforts on the increase in gas prices and how that could impact folks in Montana.
“In Montana, I imagine you guys all drive quite a bit because the distances are big there, and to get to stores, to get to your office, to go to a friend's houses, and so on, you drive quite a bit whereas I drive less than three miles to get to my office and only about two miles to get to my local grocery store,” Klein said. “So, because gas prices are high and rising, that's going to affect you a lot more than it's going to affect me.”
According to Klein, inflation impacts certain people more than others and that is always going to be the case.
“The inflation statistics don't make a correction for people at different levels of income,” Klein said. “Now, there's been reporting recently to the Bureau of Labor Statistics that they should think about doing that. But for example, what we've seen the highest inflation rates for have been things like gas and other energy, fuel, and also foods. Low-income folks spend a higher proportion of their income on these items than higher-income folks. So, inflation is hitting them harder than it is other people.”
Due to several mitigating factors, Klein said energy prices have also increased significantly.
“In the wake of the war in Ukraine, and some other factors, for example, linked to climate change and a bad harvest, food prices, and energy prices have risen quite dramatically,” Klein said. “The difference now is that the Fed, even though it seems to have taken a little while to get on to the job, is on the job now and they've raised interest rates quite a bit.”
Klein said the recent spike in gas prices was alarming, but it was nothing like what occurred in the 1970s.
“If you look at oil prices, they were tremendously low,” Klein said. “I mean, oil was trading at some point, like a negative amount. It's crazy. And I don't remember exactly what gas was here, but it might have been down to about $2 a gallon or something like that. So, the prices of gasoline have risen a lot since then, but it's from a very low point. But you're right, the increase that we've seen now is nothing like what we saw in 1973. The inflation that we're seeing now too, is not as high as it was in the 1970s.”
Klein served as the Chief Economist in the Office of International Affairs of the United States Department of the Treasury from 2010-2011. He is a Research Associate of the National Bureau of Economic Research, and the Founder and Executive Editor of EconoFact, a non-partisan website that provides economic analysis on timely policy issues.
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