ROI-What do US politicians agree on? Inflation is the other party’s fault: Marty Fridson

Cost of living concerns in the US are very real, ​but the debate about affordability involves statistics that often aren’t as straightforward as they seem. The personal consumption expenditures (PCE) data released on ​Wednesday showed that inflation rose by 0.3% on a monthly basis in August, bringing ‌the ​12-month rate to 3.4%, well below consensus estimates.

This information will likely be sliced and diced by countless economists and sell-side analysts alike, highlighting every facet. Yet many Americans will likely hear the information in a much less nuanced way from a far less objective source: their elected leaders. Political agendas often influence how those numbers are selected and presented. That’s nothing new, of course, as a noteworthy 1963 ‌episode illustrates.

The prospect that wheat policy could raise food prices became a political issue during John F. Kennedy's presidency, particularly in the 1963 debate over federal wheat supports. That year, a loaf of bread averaged an all-time high of around 22 cents. Republican lawmakers such as Representative Robert Dole of Kansas blamed the administration's farm bill, which included price supports for wheat. Texas Senator John Tower charged that the Kennedy administration was essentially imposing a "bread tax."

Democrats punched back. They argued that the cost of wheat represented only a small portion of bread’s retail price, which also reflected ‌expenses such as processing, packaging, and transportation. Meanwhile, the US Department of Agriculture (USDA) sought to persuade the public that what really mattered wasn’t food’s cost in dollars, but rather what slice of Americans’ incomes it represented. They even crafted a slogan: “Food Is a Bargain.”

So ‌who was correct? On the surface, everyone. Prices were up, but food's share of consumers' pocketbooks was also down. Yet the latter point simply confirmed the law of economics defined by the statistician Ernst Engel a century earlier. He found that as a family’s income increases, it spends a smaller percentage on food, unchanged proportions on housing and clothing, and higher percentages on education, health and recreation.

According to the Census Bureau, the average US family income in 1963 was up by almost 30%, in real terms, from its decade-earlier level. The much-ballyhooed decrease in the percentage consumers spent on food was thus a highly predictable result. One could then argue that the question should ⁠not have been the ​percentage of consumers’ incomes allotted to food, because that would naturally decline ⁠as incomes rose. The question was whether food prices were still higher than they would have been without the Kennedy farm bill.

So I’ll ask you again, which side was right? WHO’S TO BLAME? THE OTHER PARTY

One might assume that more than 60 years later, voters would have gotten wiser to statistical misdirection, but it’s questionable ⁠whether that’s the case. For example, politicians today often appear to take advantage of many voters' failure to distinguish between what a basket of goods costs and how quickly those costs are rising.

This has often been seen in the post-pandemic era, as inflation has run above the Federal Reserve’s 2.0% ​target for over five years. When inflation has slowed for a few months, the party in power — whether Republicans or Democrats — has often hailed the supposed achievement, even if the current administration’s policy had little to do with the short-term change — as ⁠has often been the case.

The opposition party, for its part, has often stressed how vastly higher prices are than they were a few years ago – whenever it was that they were last in power. Strategic selection of the base date for such calculations is a key part of the game. We saw this dynamic play out in September. ⁠Democratic ​Senate members of the Joint Economic Committee bemoaned the fact that the average US household had incurred more than $4,200 in additional costs since Donald Trump took office in January 2025.

Their Republican peers countered that the figure was $2,881 below what it would have been if the cost of living had advanced as rapidly as it did in the comparable portion of Joe Biden’s term. Who was correct? Everyone. How many Americans does that help? Very few.

The bottom line is that straight talk on economic issues is no more the norm today than ⁠it was when Hollywood’s top box office star was Doris Day. Obtaining an accurate picture requires digging more deeply, looking well beyond the few statistics often cherry-picked by either party to portray their opponents in the worst possible light. As the country heads into ⁠the midterm elections in November, this lesson is particularly important.

(The views expressed ⁠here are those of Marty Fridson, the publisher of Income Securities Investor. He is a past governor of the CFA Institute, consultant to the Federal Reserve Board of Governors, and Special Assistant to the Director for Deferred Compensation, Office of Management and Budget, The City of New York.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn, and ‌X.

And listen to the Morning Bid daily ‌podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a ​week. (Writing by Marty Fridson; Editing by Marguerita Choy and Anna Szymanski)