The Inflation Illusion

April 9, 2021

Why Tuesday’s numbers will look artificially high.

The Roosevelt Rundown is an email series featuring the Roosevelt Institute’s top stories of the week.

How to Interpret Next Week’s Inflation Numbers

When the latest inflation numbers come out on April 13, they’ll look a bit higher than usual, and opponents of the American Jobs Plan are likely to pounce.

Don’t be fooled.

As Roosevelt’s Mike Konczal, J.W. Mason, and Lauren Melodia explain in a new blog post, those high-on-paper figures won’t be what they seem.

“. . . for the next several months, the conventional [year-over-year] YoY measures of inflation will be comparing today’s prices to those of the depression-level COVID lockdown, when official unemployment was near 15 percent,” they write. 

That means the annual inflation rate revealed next week will reflect deflation in 2020 rather than inflation in 2021.

“Anyone who wants an objective assessment of economic reality, either in reporting or policy conversations, will need to correct for this distortion. If a seemingly big spike in . . . YoY inflation is misunderstood as a sign of rising prices today rather than of falling prices a year ago, debates over the American Jobs Plan and future infrastructure proposals could go off the rails,” they argue.

Read on for three reasons next week’s inflation numbers are a bad argument against infrastructure investment.

And for more from Konczal, listen to this week’s episode of Pitchfork Economics, which includes an interview about his new book, Freedom from the Market: America’s Fight to Liberate Itself from the Grip of the Invisible Hand.


A Fair Share

In a Wall Street Journal op-ed this week, Treasury Secretary Janet Yellen called for “a more effective global minimum tax” so that “corporations can’t shift profits around the world to minimize their tax bills”—an essential step for global fairness, as Roosevelt Fellow Darrick Hamilton explained on Democracy Now! 

“Another way to conceive of this is, think of it as not only an industrial policy, but even a trade policy through tax reform, to make sure that we have fair standards, when we think about ways in which nation-states engage across borders,” he told hosts Amy Goodman and Juan González.

Yellen’s pitch builds on the Biden administration’s broader plans to increase corporate taxes, which could “reshape US politics,” as Roosevelt Director of Governance Studies Todd Tucker writes in a Washington Post op-ed

“President Biden’s measure would raise $2.7 trillion over 15 years, nearly half of which—$1.2 trillion—would come from increasing the statutory corporate tax rate from 21 percent to 28 percent. While this would put business taxes at only half the peak rate levied in the 1960s, it would still be the biggest tax hike on business in US history that’s not related to funding war.” Read more.


Catch Up

Earlier this week, Roosevelt hosted How to Achieve a Climate-Forward Recovery, in which moderator Rhiana Gunn-Wright and speakers Brandon Hurlbut, Lenore Palladino, and John Washington discussed what the Biden administration’s economic and infrastructure plans mean for climate change and environmental justice.

“If you don’t deliberately think about equity, and design policy so that the outcomes are more likely to be equitable, then it’s just not going to happen. And I think it’s very similar with climate . . . Including climate continually in the plan for economic recovery and in the ways that we think about economic policy is incredibly crucial,” said Gunn-Wright.

Watch the webinar now. 


What We’re Reading

Four Ways of Looking at the Radicalism of Joe Biden [feat. Roosevelt’s Felicia Wong]New York Times

The Urgency of the Black Climate Agenda – Vox

A Novel Effort to See How Poverty Affects Young BrainsNew York Times

Biden Wants to Go Big on Infrastructure. History Says That’s the Right Call. [by Roosevelt Senior Fellow David B. Woolner]Washington Post

“Woke Capital” Doesn’t ExistThe Atlantic