December 19, 2022
I have been seeing various posts on Twitter from Republican politicians saying how Joe Biden’s inflation is devastating families as we approach the holidays. Of course, it would be amazing if we didn’t have some discomfort given a worldwide pandemic and a major war in Europe, but we can’t expect that Republican politicians would know about such things.
In any case, it is worth seeing the extent to which the data support the Republicans’ tale of hardship. It doesn’t look like the consumption data from the National Income and Product Accounts agree with them. Here’s the picture for real per capita non-health care consumption through the third quarter of 2022.
Source: Bureau of Economic Analysis and author’s calculations.
As can be seen, non-health care consumption, after falling during the worst period of the pandemic, jumped up in 2021, putting it well above its pre-pandemic trend. In the third quarter of this year, real per capita non-health care consumption was 2.3 percent above its pre-pandemic trend. That doesn’t look like a story of hardship.
We do have to ask about distribution, but it doesn’t seem this is simply a story of the Elon Musks of the world living even higher on the hog. As Arin Dube and David Autor have documented, wage growth since the pandemic has been most rapid for those at the bottom end of the wage distribution, and has outpaced inflation for roughly the bottom 40 percent of the distribution.
It is worth commenting on my use of non-health care consumption. Health care is tricky as a category of consumption. What we care about is health, not the number of doctors visits or medical tests we receive.
Spending on health care has slowed sharply since the pandemic. It is not clear why this is the case. If people are substituting telemedicine and home diagnostics for in-person visits and laboratory tests, this could lead to substantial savings. Whether or not it means worse outcomes remains to be seen.
In any case, it is unambiguously the case that people are consuming more non-health care items this holiday season than they would have reason to expect before the pandemic. The Republicans’ grinch routine is just play acting.