On The Money — Prices soar: Annual inflation hits 40-year high

by Sylvan Lane,Aris Folley and Karl Evers-Hillstrom - 03/10/22 6:58 PM ET

Happy Thursday and welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. Subscribe here: digital-staging.thehill.com/newsletter-signup.

Today’s Big Deal: We’re breaking down another frustrating jump in price growth. We’ll also look at the latest on government funding and Ukraine aid negotiations and the IRS’s plan to tackle tax filing season.

For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Reach us at slane@digital-staging.thehill.com or @SylvanLane, afolley@digital-staging.thehill.com or @ArisFolley and kevers@digital-staging.thehill.com or @KarlMEvers.

Let’s get to it.

Five takeaways on latest inflation run

Consumer prices rose at the fastest annual rate in more than 40 years in February, according to Labor Department data released Thursday.

Inflation steamed ahead for yet another month, pushing the cost of living even higher after more than a year of accelerating price growth. While the burst of inflation began with a small group of goods hit by specific supply shortages, rapid price growth has spread to basic necessities such as food, energy and shelter.

Here are five takeaways from the Labor Department’s consumer price index (CPI) report for February:

1. Monthly inflation rose after three-month plateau

The CPI rose 7.9 percent in the 12 months ending in February, marking the highest annual inflation rate since January 1982. While the yearly inflation rate is eye-popping, the 0.8 percent monthly increase in prices could be greater cause for alarm.

2. Household staples led the inflation spike

When inflation began to rise last spring, higher prices for goods uniquely affected by the pandemic led the way. Households are now having a harder time dodging rising costs with prices for food, energy and shelter fueling much of the February increase in inflation.

3. Rent hikes are well underway

Rents have recovered rapidly after plunging in 2020 and have fueled inflation along the way. Rent of shelter rose 4.8 percent annually in February and 0.6 percent last month alone. Costs for rental housing are likely to increase as the market heats up over the spring and summer.

4. Some supply lines are recovering

A monthly decline in used car prices was a welcome reversal after used cars rose 41.2 percent on the year. Prices for video and audio gear, televisions, medical equipment and furniture also fell in February after supply chain malfunctions led to rapid price increases in 2021.

5. War in Ukraine is already taking a toll

While the February inflation report captures the economy before Russia launched its invasion of Ukraine, tensions leading up to the war are partly responsible for higher energy costs last month.

LEADING THE DAY

Senate races to pass funding deal, Ukraine aid

Senate Republican leaders are offering a deal to Democrats to speed up passage of a sweeping government funding bill that includes $13.6 billion in Ukraine aid.

The GOP says they’ll agree to an accelerated schedule if Democrats give them up-or-down amendment votes on GOP priorities.

Senators are facing an end-of-the-day Friday deadline to pass a bill to fund the government or risk a shutdown. The House passed a sweeping $1.5 trillion bill and a days-long continuing resolution (CR) on Wednesday night before leaving town.
Even if the Senate passed the sprawling deal on funding the government through the end of September and Ukraine aid, they are still expected to need to pass the days-long CR to buy time to print the formal copy of the bill and get it to President Biden’s desk for his signature.
The Senate typically leaves town for the week on Thursday and Sen. John Thune (S.D.), the No. 2 Senate Republican, predicted that it “should” pass today if they are able to cut a deal.

Because the Senate is up against a deadline, they’ll need buy-in from all 100 senators to agree to speed up the bill. Aides cautioned that the debate could spill into Friday and any one GOP senator could drag the process into the weekend.

Asked about passing a massive bill only days after it was publicly unveiled, Thune said that the process “stinks.” And he didn’t rule out that a GOP senator could try to drag out the bill over frustration with the process.

The Hill’s Jordain Carney has more here.

ALSO READ: GOP demands delay vote on spending, Ukraine aid

‘Putin price hike’

President Biden on Thursday said that the inflation report shows Americans are feeling the impacts of the price hike brought on by Russian President Vladimir Putin’s invasion into Ukraine.

“Today’s inflation report is a reminder that Americans’ budgets are being stretched by price increases and families are starting to feel the impacts of Putin’s price hike. A large contributor to inflation this month was an increase in gas and energy prices as markets reacted to Putin’s aggressive actions,” Biden said in a statement.

Biden acknowledged that prices will continue to rise but said that “the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing.”
Republicans have criticized Biden’s talking points, noting that overall consumer prices had been steadily rising long before Russia invaded Ukraine.

The Hill’s Alex Gangitano has more here.

BUDGET BUMP

IRS budget boosted as agency struggles against tax return backlog

The IRS budget for 2022 is set to receive a 6 percent increase from the previous year in the $1.5 trillion omnibus spending package, as the tax agency faces a pandemic-induced backlog of unprocessed tax returns and a staffing shortfall.

One of the largest segments of the increase will go to services for taxpayers, which received $225 million, a 9 percent annual jump that will help tackle processing delays and unanswered phone calls that have affected tens of millions of Americans.

“Last year was the most challenging year taxpayers and tax professionals have ever experienced,” National Taxpayer Advocate Erin Collins testified last month to Congress, adding that many of the delays experienced by taxpayers “have been substantial and ongoing.”

The agency hopes to hire 10,000 new employees, including 5,000 in the next few months, to tackle the backlog.
Another significant budget boost is a 20 percent increase for upgrading the IRS’s various business systems and a 4 percent increase for enforcement capabilities.

The Hill’s Tobias Burns has more on the figures here.

Stay ahead of the news cycle with The Hill’s new Evening Report, featuring the day’s top stories and a look ahead to tomorrow.

Virtual Event Invitation—The Future of Education—Thursday, March 17 at 1:00 PM ET/10:00 AM PT

After two years of virtual and hybrid learning, many students are still playing catch up. The federal government has provided billions of dollars in relief funds to school districts across the country. How have state officials been using these funds and how can equity issues be tackled? Join us at The Hill’s annual Future of Education Summit for headliner conversations with Education Secretary Miguel Cardona, Sen. Bill Cassidy (R-La.), Rep. Jahana Hayes (D-Conn.) and Govs. Jared Polis (D-Colo.) and Chris Sununu (R-N.H.). Save your spot here.

Good to Know

The U.S. Capitol is seen from the Supreme Court on Tuesday, March 8, 2022.

After an 11-year drought, congressional earmarks are back with vengeance.

The $1.5 trillion, 2,741-page omnibus spending package is loaded with funding for lawmaker pet projects, some of which could help incumbents in this fall’s elections.

The legislation includes more than 4,000 earmarks, according to a list of projects provided to The Hill by a Senate Republican aide that spanned 367 pages.

Here’s what else we have our eye on:

The Department of Justice (DOJ) has uncovered a vast array of alleged fraudulent and criminal activities tied to more than $8 billion in federal COVID-19 aid, the agency announced Thursday.
Goldman Sachs is leaving Russia following the nation’s invasion of Ukraine and subsequent Western sanctions.
The Kremlin said Russia’s economy was experiencing a “shock” after the U.S. and its allies imposed sanctions on the country.