On the Money — Inflation hits highest level in decades

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

Today’s Big Deal: Consumer prices climbed 7 percent for the year ending in December in the highest increase since 1982, according to Labor Department data. We’ll also look at a recent report detailing the major problems that plagued millions of taxpayers last year, and concerns ahead of the coming tax filing season.

For The Hill, I’m Aris Folley, filling in for Sylvan Lane on the Finance team. Write me at afolley@digital-stage.thehill.com or @ArisFolley. You can reach Sylvan at slane@digital-stage.thehill.com or @SylvanLane. 

Let’s get to it.

Inflation rises to highest level since 1982

Consumer prices climbed 7 percent for the year ending in December, an increase the Labor Department said on Wednesday is the highest since 1982.

The department’s consumer price index (CPI), which measures inflation for consumer goods and services, increased 0.5 percent in December alone, still a smaller jump than the previous two months.

• Officials labeled price increases for shelter, used cars and trucks as the “largest contributors to the seasonally adjusted all items increase.” Higher prices for food were also marked in the latest report as a notable contributor to inflation, though its 0.5 percent increase last month was less than in recent months.
• Prices for household furnishings and operations, apparel, new vehicles and medical care also rose in December, while motor vehicle insurance and recreation prices declined, just as the month before. Energy prices dropped 0.4 percent in December after a series of increases. Gasoline and natural gas prices also decreased.
• The new inflation report adds to a list of challenges President Biden faces as his administration has sought to tout strong strides the economy has made amid the nation’s ongoing recovery during the pandemic in the face of rising prices.

Biden said the newest data on inflation shows his administration is “making progress in slowing the rate of price increases” but acknowledged more work is needed to lower costs for American families.

“Inflation is a global challenge, appearing in virtually every developed nation as it emerges from the pandemic economic slump,” Biden said. “America is fortunate that we have one of the fastest growing economies—thanks in part to the American Rescue Plan—which enables us to address price increases and maintain strong, sustainable economic growth. That is my goal and I am focused on reaching it every day.”  

The Biden administration has taken steps to ease supply chain bottlenecks in ports and with trucks in order to keep costs down.

The Hill’s Morgan Chalfant has more here.

LEADING THE DAY

IRS watchdog ‘deeply concerned’ about upcoming filing season

National Taxpayer Advocate Erin M. Collins, head of the IRS’s in-house watchdog, shared concerns about the upcoming filing season in her office’s recent report detailing the major problems that plagued millions of taxpayers last year.

“There is no way to sugarcoat the year 2021 in tax administration,” Collins wrote in her office’s 2021 Annual Report to Congress, which was released early Wednesday. “The year 2021 provided no shortage of taxpayer problems.”

• The report found that tens of millions of taxpayers encountered delays when it came to processing returns, many of which it said “translated directly into refund delays,” as less than 80 percent of individual taxpayers received refunds.
• It also found that “[t]he imbalance between the IRS’s workload and its resources has never been greater,” given the decrease in the agency’s workforce in roughly the past decade, despite its significant increase in workload.
• A breakdown of the agency’s backlogs as of late last month found the IRS had 6 million unprocessed original individual returns, 2.3 million unprocessed amended individual returns, over 2 million unprocessed employer’s quarterly tax returns, and nearly 5 million pieces of taxpayer correspondence.

While Collins noted her report “focuses primarily on the problems of 2021,” she said she is “deeply concerned about the upcoming filing season,” before going on to call the paper “the IRS’s Kryptonite.”

In addition to the challenges faced by taxpayers and the agency last year, the report also provided a list of dozens of legislative recommendations, ranging from providing more funding to the IRS to improve operations, extending the period for receiving refunds when the agency postpones the tax filing deadline, and authorizing the office to implement minimum standards for federal tax return preparers.

I have more here.

STUDENT LOANS

Pressures aligning on Biden, Democrats to forgive student loans

Advocates and lawmakers are stepping up the pressure on President Biden to act on student loan forgiveness, focusing on it as a major issue some warn Democrats could pay for at the ballot box in the upcoming midterm elections.

Biden has been called on to work with Congress on the issue and provide more transparency about his authority to wipe out all federal student debt for millions of Americans. The latest extension of the student loan repayment pause amid record spikes in COVID-19 cases made advocates optimistic that more action will come out of the White House. 

“I think the administration needs to engage more with Congress on this because I think there’s real concern,” Sen. Bob Casey (D-Pa.) told The Hill.

Read more here from me and The Hill’s Alex Gangitano.

WEALTH GAP

Pandemic reversing gains in wealth gap globally: report

The coronavirus pandemic is reversing gains that had been made in the global wealth gap, according to a report by the World Bank.

The World Bank found global income inequality has increased amid the pandemic, reversing some progress made over the past 20 years.

The report says the pandemic has increased extreme poverty rates and disproportionately affected lower-income populations.

The Hill’s Lexi Lonas has more here.

Good to Know

About two-thirds of Kroger employees struggle to afford basic costs of living as a result of lower wages and part-time work, according to a new report.

Here’s what else we have our eye on:

• Rochelle Walensky, the head of the Centers for Disease Control and Prevention (CDC), said Wednesday that it does not plan to change its mask guidance to advise Americans to wear higher quality masks amid the omicron surge.
• California’s Department of Motor Vehicles (DMV) is reviewing Tesla’s driver assistance software to evaluate whether its vehicles should be considered autonomous, a spokesperson for the company confirmed to The Hill on Wednesday.

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.