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Shoppers in Cambridge, Mass., in 1977. (Barbara Alper via Getty Images)

‘That Doesn’t Feel Like $150 Worth of Groceries’

Why inflation is worse than you think.

In 2011, the last time inflation was on the rise, the then-president of the New York Federal Reserve, William Dudley, ventured into a working-class neighborhood in Queens, New York, to give a speech explaining why inflation wasn’t a big deal. Finding that he wasn’t making an impact, Dudley famously picked up an iPad 2 and told his audience, “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful.”

“I can’t eat an iPad!” someone in the audience shouted back.

I was reminded of this story recently while standing in the checkout line of my local grocery store. An elderly neighbor standing in front of me saw the total price of her purchases flash up on the screen. For a moment, her eyes registered shock. Then I heard her mutter, “That sure doesn’t feel like $150 worth of groceries.”

What my neighbor was sensing was the general increase in the price of goods and services and an associated decline in her money’s purchasing power. That’s the essence of inflation. 

I didn’t have the heart to tell her that a bag of groceries isn’t included in what’s called the “core inflation” measurement. That’s because energy and food prices are subject to sudden variations caused by events like crop failures or war. Fluctuations in the price of a carton of milk are not thought to tell us much about long-term inflationary trends. 

The problem is people still have to spend their hard-earned dollars on food and gas—and there’s no reason to assume that spiking inflation doesn’t affect that.

Making matters worse is the fact that the Bureau of Labor Statistics and the Federal Reserve, which measure inflation, have long relied on measurements that make it appear as if inflation is not as bad as it really is.

Case in point: your house. Your house isn’t considered a consumable item, because (usually) when you live in a house you don’t use it up, or expend it. So, it’s excluded from the list of consumables in the government’s inflation indices. 

Yet the price of your house—and everyone else’s house—is affected by a decline in your money’s purchasing power. The government tries to correct for this by polling homeowners every six months about how much they think their homes would rent for. But homeowners often don’t know this, and only some of the responses are factored into official inflation estimates.

The bottom line: a significant gap between the inflation that we experience and the government’s inflation numbers. 


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There’s good reason to believe the gap is meant to paint a rosy picture. Houses are most Americans’ primary asset. If you want to massage the inflation number down, minimizing inflation’s impact on the value of housing makes all the sense in the world.

That, in turn, points to a broader problem with the way the federal government treats inflation. Not only is it downplaying the real inflation rate, it is camouflaging its own misdeeds. It is actions taken by the federal government—including the Biden administration, the Trump administration, Congress and the Federal Reserve—that have landed us in our present inflationary mess. Over the past several years, a bipartisan array of government officials, elected and unelected, have coalesced around a series of half-truths to paper over this fact.

The primary reason for the reduction in our purchasing power is not the supply-chain disruptions occasioned by government responses to the COVID pandemic, let alone Vladimir Putin’s invasion of Ukraine.

For one thing, supply-chain disruptions only affect certain prices. A shortage of circuits needed to build computers, for example, can’t explain the rise of the price of dining-room tables. A decline in the supply of wood can’t explain why laptops are ticking up. Fed officials know this. 

They also know full well that inflation’s causes are to be found in the government increasing the supply of money and credit to fuel general demand for goods and services—to an extent that exceeds the economy's productive capacities. This is the culprit. This is why it feels like we’re paying more for less.

Let’s rewind a couple years.

In 2020, to counteract the pandemic’s impact, Donald Trump pushed through Congress two enormous stimulus packages mostly funded by increases in America’s already obscene public debt. The next year, Joe Biden pursued a similar path, claiming that stimulus packages were necessary to get the economy moving again.

Overhanging all this was a Federal Reserve that, from 2009 to 2014, deployed what’s called quantitative easing—the purchase of preset amounts of government bonds and other financial assets to inject money into the economy—to boost economic activity. When the government, in March 2020, shut down the economy, Jerome Powell’s Fed returned to quantitative easing programs on a scale that dwarfed previous efforts.

The result of all this money being pumped into the economy is higher prices and a decline in our money’s purchasing power. This is reflected in everything from the price of eggs to women’s dresses to electricity to the rent you pay every month. As if to add insult to injury, “scarcity inflation,” which is due, in part, to disruptions to the supply chain, have compounded our inflationary woes. Just one example: recently, on eBay, people have started listing baby formula and asking would-be buyers to make a bid—triggering bidding wars among frantic mothers who have had trouble finding formula in grocery stores. The responsibility for most, if not all, of this lies squarely with policy makers in Washington, D.C.

That hasn’t stopped some of these people from trying to blame corporations for inflation. Senator Elizabeth Warren has insisted that big businesses—ranging from grocery chains to private equity firms—have made inflation worse by “jacking up prices.” President Biden’s spokeswoman, Jen Psaki, has referred to “the greed of meat conglomerates.”

If greedy corporations could “jack up” prices whenever they wanted to, then they would do it all the time, over and over. But they don’t. That’s because, well, consumers have choices, and when things get too expensive, they stop buying those things. Suggesting otherwise is silly. 

The inverse of this paper thin argument for “corporate greed” suggests that, until recently, corporations were not greedy, that, since the early 1980s, when inflation was really bad, corporations haven’t been all that keen on making that much money. Perhaps the senior senator from Massachusetts should spend a little more time in the private sector.

All of which underscores the all-important point that neither businesses nor the Russian president nor greedy hedge-fund managers nor greedy tech barons nor greedy CEOs nor mean, politically incorrect people who don’t employ the correct hashtags print money. The federal government does that.

So let’s be clear: politicians, who are not very good at much, are supremely good at deflecting blame. And that’s what this is. This shouldn’t come as a surprise.  The same people who underreport inflation’s impact on Americans shouldn’t be expected to acknowledge that it was their decisions that landed us in hot water in the first place. Unfortunately, it is those people—the policymaking failures who run the government—who are now charged with getting us out of it.

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