Inflation is a shock we’re still getting over. Could it decide this election?

For good reason.

While the rate of price increases has slowed dramatically this year — prices have even dropped on gasoline and many kinds of food — for a time in mid-2022, Atlanta-area inflation was about 10%.

While many employees did see solid pay boosts, a lot of raises were outpaced by those price hikes.

High-income Americans are doing well, but many households that took on debt are still paying it off, said Michael Pearce, deputy chief economist at Oxford Economics. “Spending patterns of low-income Americans will take years to recover.”

Inflation affects pretty much all Americans, but it hits every household a little differently, a burden in various ways, while sometimes actually a boon.

It depends on what you buy, how high your income is, whether you’ve had a raise, whether you are paying off debts or taking out new loans and whether you are depending on income from wages, savings or investments.

I am curious about the impact of the economy on those 65+ on fixed incomes. - Deb Snow

No question, the people hurt the most by inflation are those who are on a fixed income. And while some retirees do have investments, many of them — like people relying on disability benefits or alimony arrangements — have income that may not keep up with inflation.

Social Security, for example, has a cost of living adjustment. In 2022, payments were raised by 5.9% and the next year by 8.7%, according to AARP.

Inflation for those years was 7.6% and 6.4%, according to the Bureau of Labor Statistics. But those are just averages of the items BLS tracks, so a household’s pain depended on what they were buying.

For example, metro Atlanta gas prices jumped in 2021 from about $2 a gallon to more than $3. The next year, they rocketed to more than $4.50 before easing back to about $2.70. Housing prices for many were way up, too.

It’s not just retirees who are vulnerable. Anyone whose paycheck doesn’t keep up with prices has seen their purchasing power eroded.

Small businesses, too, were squeezed, since materials and products they bought got more costly, while they might not have had the market power to raise their own prices.

Yet some people do benefit from inflation.

Especially if you are paying off a fixed-rate mortgage or auto loan, inflation means you pay with dollars that are worth progressively less than when you started.

And if you take income from a 401(k) or other investments, you likely saw healthy gains in the past several years.

Still, most people don’t like seeing higher prices.

Certainly for many, when metro Atlanta’s inflation in 2022 briefly touched double digits, it was a shock — partly because Americans had become conditioned to low inflation.

Between 1948 and 2020, the average inflation rate was 3.5%. Between 1990 and 2020, it was even lower — just 2.3%.

A distant and painful memory is the decade dominated by the Arab Oil Embargo and the Iranian Revolution when oil prices soared and inflation averaged 9.1% a year.

Even with the spikes in 2021, inflation over the past three years averaged 5.1% — not so different from some earlier periods. But the spikes were painful.

The Sept. 3 AJC reports June Georgia inflation at 2.6%. What is the cumulative Ga. inflation over the past 3 years? - Clark McDonald

Yes, Mr. McDonald, they add up.

The most cited number for inflation — the Consumer Price Index, which bundles a collection of items together — is roughly 20% higher than it was when the Biden-Harris administration began, with most of the increases coming in 2021 and 2022.

Remember that what matters most is the balance between your pay and prices — if your income goes up faster than inflation, your purchasing power grows. And pay has been generally rising, rising faster than inflation for 16 months in a row, according to the Economic Policy Institute.

Wage growth has, the EPI says, been strongest for lower-wage workers.

Median household income has been rising about as fast as inflation, according to the Census Bureau. But that means half of American households were behind the curve.

Behind the inflation spike was a mix of factors, mainly tied to the coronavirus pandemic: supply chain woes, the huge burst of pandemic spending under both Joe Biden and Trump — not to mention the near-zero interest rates engineered by the Federal Reserve to keep the economy going.

Moreover, virtually all developed nations saw high inflation in that period, many hit harder than in the United States.

Whatever the causes, as the economy rebounded, wages rose robustly which let many people recoup their purchasing power. Average pay has been increasing 4.6% according to the Atlanta Fed’s wage tracker — higher than inflation.

But for many, wages have been playing catch-up. During the time that prices were eating into purchasing power, many people resorted to more debt, especially credit cards.

Yes, unemployment is low, job growth has been steady and solid, and Americans on average have seen good income growth, but not for everyone. And inflation is like a storm surge — even after it ebbs, some damage remains.

Why when you show the inflation rate in your facts you do not also show it for the period of time Biden has been president rather than just showing it for one month or year? Inflation is compounded. It appears you are trying to minimize what inflation has been. Show both or don’t show either one to be fair. - Blair Funderburk

Fair point, Blair. Sometimes there’s a tendency to talk about the immediate news and not look at how much things have changed over a longer period.

Inflation is a measure of change, usually a year-to-year comparison.

The compounding you ask about is reflected in that CPI figure that’s roughly 20% higher than it was when the Biden-Harris administration began.

It was up about 8% during Trump’s presidency, although it plummeted early in the pandemic. But the overall trend of the economy during the Trump years — on jobs, gross domestic product and inflation, too — was in line with much of the previous decade.

It’s not the first time inflation has been potent campaign fodder. In 1980, with unemployment 8.4% and inflation running at more than 12%, challenger Ronald Reagan won a resounding victory over incumbent President Jimmy Carter. Four years later, the unemployment rate was still above 7%, but inflation had dropped to 4%.

Reagan won reelection in a landslide.

This election season, job growth has been solid, unemployment is low, but again, inflation has loomed large.

The truth is, presidents get too much credit for good economies and too much blame for bad times. In a $29 trillion-a-year economy, presidents can have an effect, but on the most commonly cited prices, their influence is limited.

Take housing. It’s mostly a local issue and most changes to federal policies — like helping builders — take years to accomplish. Other ideas, like subsidies for homebuyers, could even backfire if they ramp up demand and make the market tighter — and prices higher.

Or take gas prices. The most important component in gas prices is the price of oil, which is set globally. When prices do ascend — as they did after Russia’s invasion of Ukraine — a president can soften the blow by opening some of the nation’s strategic reserves, but that help is modest and temporary.

Or take food. Experts argue about how much of that was caused by supply chain snarls, how much by energy costs and how much by the huge chains taking advantage of the situation by cranking up prices.

By definition, inflation is a rise in the prices of goods and services. In general, economists say a little inflation is a good thing, a sign of a growing and healthy economy in which most people are getting raises and have disposable income.

The Federal Reserve, for example, has set a target of 2% inflation and the most recent data shows inflation has continued to fall and is barely higher than that. But that normalization comes two years after the 2022 inflation spike.

Overall prices typically don’t go down — that’s deflation — and you don’t want them to, because that would likely mean the economy is cratering. So even if inflation is mild, over the course of time it adds up to much higher prices. In good times, when raises are generous and steady, consumers can shrug it off.

“The cumulative effects of inflation are still there,” said Alan McKnight, chief investment officer for Regions Bank. “It takes longer for wages to catch up.”

Average inflation rate*

1948-2020: 3.5%

1973-1982: 9.1%

1990-2020: 2.3%

2021-2024: 5.1%

The politics of inflation

Reagan administration: 4.7%

George H.W. Bush administration: 4.4%

Clinton administration: 2.6%

Bush administration: 2.8%

Obama administration: 1.4%

Trump administration: 2.1%

Biden administration: 5.1%

Average metro Atlanta gas price**

January 2017: $2.19 (Trump inaugurated)

April 2020: $1.76 (depth of pandemic)

January 2021: $2.22 (Biden inaugurated)

June 2022: $4.62 (after Russia invasion of Ukraine)

Mid-October 2024: $2.83

*Year over year, measured monthly

**One gallon, regular

Sources: Bureau of Labor Statistics, Federal Reserve Bank of St. Louis, Gas Buddy, Census Bureau