It’s Not Just the Grinch Stealing Christmas

The government is talking up economic gains, but the economy is still the biggest concern to the public. Can both be right? Economics professor Stephen Henn tackles the impact the economy will have on the cost of a holiday dinner.

Key Highlights

• ^{Affordability is the real concern for households, even as government data shows economic gains}
• ^{Inflation and prices aren’t the same: inflation can fall, but prices remain permanently higher after years of increases}
• ^{From 2020–2024, the U.S. experienced a major price surge, leaving the overall price level stuck at a much higher base}
• ^{Holiday meal costs illustrate the issue: Cindy Lou Who’s 2020 dinner cost $39.12; in 2025 the same meal costs $50.10—a 28% jump}

By Stephen Henn

Affordability, not just “the economy,” is the dominant concern for many households today.

People hear that inflation is down and wonder why life still feels so expensive. The answer lies in the difference between inflation and prices: when inflation falls, prices are rising more slowly but not going back to where they were.

From 2020 to 2024, the U.S. went through one of the sharpest bursts of inflation in decades. Even though the inflation rate has since eased, the price level is now locked in at a much higher base. A grocery bill that jumped 20% over several years does not shrink just because inflation is now 3%. Meanwhile, paychecks have often lagged behind rising costs for housing, energy, health care and food. The result is a persistent affordability squeeze that feels very real, even as headline numbers improve.

To see this more concretely, it helps to visit Whoville.

Imagine Cindy Lou Who’s family Christmas dinner. In 2020, a simple meal—ham, potatoes, vegetables and vanilla ice cream—cost about $39.12*. Today, the same meal costs $50.10, a 28% increase. For families already stretched thin, that feels a lot like the Grinch is still stealing Christmas.

Max hasn’t been spared either. Dog food is up more than 31% since 2020. The only small “gift” for the Whos is that toys for Cindy Lou and her siblings cost about 3% less than in 2020. And while official statistics might show that the cost of this holiday meal rose only about 1.5% over the last year, that is cold comfort to households still living with the cumulative jump since 2020.

So what can actually make things feel more affordable?

One theoretical option is deflation—reducing the overall price level by pulling money out of the economy. But deflation doesn’t only cut grocery prices; it also tends to pull down the value of houses, retirement accounts and other assets. Many families would not consider a 5% drop in food prices a fair trade for a 5% decline in their home value or retirement fund.

A more constructive path is to increase the supply of key goods like food, energy and housing. Not all price increases are pure “inflation” in the monetary sense. Some stem from supply constraints or regulatory bottlenecks. Policies that encourage more production and investment in these areas can help ease prices without wrecking household balance sheets.

Wages are the other crucial part of the story. From 2021 to 2024, real wages—pay adjusted for inflation—fell by about 0.64% per year on average. In the first half of 2025, real wages have rebounded, rising about 2.23%. That’s welcome progress, but it hasn’t yet fully erased the earlier losses. Over time, the most durable way to improve affordability is to ensure that workers’ pay consistently grows faster than prices.

Until then, many families will continue to feel like the numbers in official reports don’t match the reality at their kitchen tables—or their Whoville Christmas feasts.

*Price for seven pounds of ham, three pounds of potatoes, one and a half pounds of vegetables and a half-gallon of ice cream using Federal Reserve Bank of St. Louis (FRED) Data for September 2020, 2024 and 2025.