Biden takes an inflation hit

White House officials are struggling to show Americans that they are paying close attention to rising prices after federal data released Wednesday showed inflation rose well above expectations in October.

The consumer price index (CPI), which tracks inflation in a variety of basic goods and services, rose 0.9 percent last month and 6.2 percent in the 12 months to October, the rate highest annual inflation since November 1990.

Most of October’s inflation was driven by rising food and energy prices, a blow to the stomach for cash-strapped families and a political nightmare for the Biden administration.

“The costs for low-wage households to cover their transportation costs, grocery bills and rents are reducing the jump they have seen in wages,” Diane Swonk, Grant Thornton’s chief economist, wrote in an analysis Wednesday. “The public is angry.”

Extending high inflation beyond the goods and services hardest hit by the pandemic is also raising concerns about how long inflation will continue to rise.

“Inflation is sizzling and will probably get hotter before it cools,” Swonk wrote in his analysis, another gloomy note for Biden. White House.

Rising prices are one of several factors driving Biden’s approval ratings and voters’ views on his handling of the economy.

It is a frustration for the Democrats.

Biden has presided over job market growth, rising consumer spending, higher household savings and rising stocks. But people in polls seem more focused on rising prices, shortages and other setbacks in the recovery.

Most economists still believe that inflation will begin to cool down as bottlenecks related to the pandemic ease, marginalized workers return to the workforce, and consumers shift their spending back to services and away from it. goods sector overloaded.

“There is a lot of evidence that what we are seeing is an economy that, to some extent, simply cannot handle what would otherwise be a very rapid real recovery,” said George Selgin, director emeritus of the Institute’s Center for Monetary and Finance. Libertarian Cato. Financial alternatives.

“It is a temporary problem that lasts much longer than anyone wants,” he continued. “What is unfortunate is that the public is getting a kick out of inflation.”

Biden’s officials and allies, who had largely ignored the threat of inflation this spring, are now preparing for a deeper political backlash. Republicans have spent months blaming Biden’s economic agenda for high inflation and have vowed to make it a hot topic in the midterm elections.

“The Republicans are going to double down on this and the White House knows it,” said a global ally of Biden. “All these economic problems are going to add up and this could be incredibly troublesome for the White House. These are the kinds of issues that are decisive for voters. “

A Democratic donor also said the White House must continue to address the problem.

“They can’t allow Republicans to push the narrative on this,” the donor said.

Biden and administration officials launched a media blitz Wednesday to tout their plans to fight inflation.

In a speech at the port of Baltimore, the president touted how the recently approved bipartisan infrastructure deal could help improve and strengthen supply lines that have been overwhelmed by a deluge of demand for goods. Biden spoke with CEOs of major shipping and retail companies on Tuesday after launching an effort last month to speed up package delivery.

“COVID-19 has changed the way we spend our time and money. More products are being delivered than ever. That’s because people have a little more room to breathe than last year. That is good. But it also means that we have a higher demand for goods at the same time that we face supply disruptions to make those goods, ”Biden said.

“This is why it is so important that we do everything in our power to stabilize the supply chain.”

Administration officials have also spent weeks talking about the possible deflationary impact of Biden’s “Build Back Better” plan: the roughly $ 1.75 trillion climate and social services bill. Supporters of the plan say provisions to expand access to child care, lower prescription drug prices and expand clean energy production will help lower prices for working families.

Economists, however, say that any potential impact on inflation will not come in months, if not years.

“I don’t think your case will improve if you say ‘pass my bills and inflation will go down,'” said Bill Galston, a senior fellow at the Brookings Institution and a former internal policy aide to President Clinton.

“I really don’t think it’s a very credible argument for the public.”

The argument has also backfired among conservative Democrats like the senator. Joe manchinJoe Manchin: Expected Price Hikes Raise Political Stakes for Biden Justice Co-Founder Democrats: Democrats Have Allowed Manchin, Sinema to Become Party “Dictators” Biden Calls for Democratic Unity at DNC ​​Event MORE (DW.V.), who argued Wednesday that the “threat posed by record inflation” is “getting worse.”

“Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” Manchin tweeted.

Manchin has expressed deep concern about inflation for months as he lobbied for cuts in social services and Biden’s climate law. Your support is essential to pass the measure with simple majorities through the budget reconciliation process, which would require the support of all but three House Democrats and every Democratic senator amid universal opposition from the Republican Party.

While Biden may push his agenda through Congress, his ability to curb the inflation that threatens him is nonetheless limited. Energy prices are expected to rise as global oil and gas production lags, pandemic-related health concerns and responsibilities still keep millions out of the workforce, and global supply lines are still in place. tangled up by factory closures and shipping delays around the world.

“There are strong fiscal policy instruments and strong monetary policy instruments, in this case, to deal with problems that require something more like a scalpel,” Selgin said.

“The potential for the ability to do anything is limited and the potential to screw it up is very high.”

Still, there are some early signs of pressure on supply chains and prices are beginning to fade.

The number of containers that remained in the docks of the Long Beach and Los Angeles ports for more than nine days fell from 127,000 on Nov. 1 to 101,000 on Nov. 8, according to data released Wednesday by the White House.

The Baltic Dry Index, which tracks shipping costs, has fallen more than 50 percent from its peak in early October and has dropped to its lowest level since June.

General Motors also told Reuters on Wednesday that, for the first time since February, the automaker has enough semiconductor chips to keep all of its North American production plants running. The chip shortage has been a major source of inflation for new and used cars, auto parts, and a wide range of consumer electronics.

“The truth of the matter is that this problem will have to go away without much fiscal help being involved,” Selgin said.



Reference-thehill.com

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