Inflation Hits the Poor Hardest

Inflation is walloping Americans with low and moderate incomes as the prices of staples have soared far faster than those of luxuries.

The goods and services Americans consumed in February were 4 percent more expensive than they were a year earlier. But there is a big divide in how much prices are climbing between the basic items people need to live and get to work, and those on which they can easily cut back when times are tight.

An analysis of government data by The Washington Post found that prices have risen 9.2 percent since 2006 for the groceries, gasoline, health care and other basics that a middle-income American family has little choice but to consume. That would cost such a family, which made $45,000 on average in 2006, an extra $972 per year, assuming it did not buy less of such items because of higher prices. For a broad range of goods on which it is easier to scrimp -- such as restaurant meals, alcoholic beverages, new cars, furniture, and clothing -- prices have risen 2.4 percent.

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Inflation is not occurring because labor markets are tight or because the U.S. economy has been overstimulated; if that were the case, wages would be driving inflation up, leaving ordinary households in decent shape and doing more damage to those who lent money at fixed interest rates.

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The rapid growth of developing nations, combined with the increasing use of land to produce ethanol, has led demand for food to outstrip supply. That middle-income family is spending $253 more each year on groceries than it did two years ago, assuming it did not change its buying patterns.

Washington Post