President Biden is suffering greatly from a problem over which he has little control: inflation.
Inflation reached its highest level in more than 30 years in October. And, as it has risen, Biden’s approval rating has plummeted.
Biden reappointed Jerome Powell as chairman of the Federal Reserve on Monday. In making the announcement, the president acknowledged the problems caused by rising prices, even while bragging about the overall strength of the economy.
“Despite all the progress we have made, we know that we still face challenges, serious challenges,” Biden said from the South Court Auditorium of the White House. “We know that there is a lot of fear and uncertainty in the country. We know that it is difficult for families to keep up with the rising costs of gasoline, food, housing and other essentials. “
Biden expressly linked the decision to give Powell another term with the battle against inflation. The president said Powell’s “patience, skill and independence” would help meet the Fed’s traditional goals of reducing unemployment and keeping inflation “low and stable.”
But political complications abound.
In addition to the Fed’s independence from the White House, Powell has often said that he sees current inflation as “transitory.”
Many experts believe that the president will be right. The general thesis is that the rise in prices is mainly due to supply chain obstructions that will be alleviated and the statistical rarity by which prices are now compared to the first year of the pandemic, when they were artificially low.
But there are several problems.
First, Powell could simply be wrong. And even if inflation is “transitory,” rising rapidly in the short term could do Biden serious harm.
Furthermore, high inflation expectations have a nasty habit of becoming a self-fulfilling prophecy. If the general population believes that inflation is going to increase for a while, people seek wage increases and rush to buy things immediately to fix prices, two factors that add to inflationary pressure.
If the inflation train keeps moving fast, the only obvious way to stop it is by raising interest rates, which is the Fed’s decision, not Biden’s, and which by its nature would throw cold water on economic growth.
Mark Zandi, chief economist at Moody’s Analytics, said that the “dreaded” cycle of inflation is quite simple and very painful.
“The workers are demanding a bigger wage increase because they think prices are going up. The companies say ‘OK, no problem’ and pass the costs on to the consumer. So the consumer says ‘Okay, no problem’ because they are going to receive a salary increase. And that cycle is very difficult to break, “he explained.” The only way to break it is to break the economy, and obviously nobody wants to do that. “
The scale of the political problem for Biden was captured by a CBS News / YouGov poll published on Sunday. It was a grim reading for the White House.
The survey found that 82 percent of Americans find items they normally buy “cost more than they cost,” while 64 percent say those items are “often out of stock.”
A surprising 67 percent of Americans disapprove of Biden’s handling of inflation, more than double the 33 percent who approve. And the proportion of the population that says the economy is in good shape is at the lowest level of the Biden presidency – just 30 percent.
Meanwhile, Republicans seize every opportunity to highlight the issue and connect it as directly as possible to the everyday life of Americans.
On Monday, the Republican National Committee (RNC) emailed reporters with a clip from NBC’s “Today” show in which a consumer affairs reporter suggested that a way to save money on Thanksgiving would be “maybe give up the turkey. “
The RNC email added: “How can you afford Thanksgiving at Biden’s America? Skip it completely. “
Earlier this month, the senator. Kevin CramerKevin John Cramer Republican Senator: Decisions on bills weren’t made based on whether they hurt or help Trump or Biden Schumer-McConnell reduce debt ceiling drama Sunday shows progress: Boosters open to all American adults; House Democrats pass spending plan to Senate MORE (RN.D.) tweeted that inflation “is not transitory. It’s big and it’s due to the terrible economic policies of the Biden Administration. “
Proponents of Biden argue that this view, asserting that the current inflation spike is driven by public spending, is unfair. Again, they cite the effects of the pandemic and supply chain disruptions.
But political attacks that use inflation as a weapon tend to be potent, even when their impartiality is debatable, according to Julian Zelizer, a professor of history and public affairs at Princeton University.
“Regardless of how bad [inflation] I mean, it can be used very effectively, ”Zelizer said in this column.
Inflation dogged President Carter in the late 1970s, but Zelizer noted that Republicans also used it to attack President Johnson and Democrats in the 1966 midterm elections. Democrats suffered a net loss of 47 seats. in the House that year.
“Any kind of increase in consumer prices is something that many Americans will see, whether it’s the price of gasoline or the price of meat,” Zelizer said.
When the latest data was released showing that year-on-year inflation reached 6.2 percent in October, the highest figure since 1990, it also showed that gasoline prices had risen 49 percent and the average price of a pound. of roast chuck increased 29 percent.
Biden is determined not to appear to be dismissing the problem. Earlier this month, he declared that “reversing this trend is a top priority for me,” even as he faced tense legislative negotiations on Capitol Hill.
On Tuesday afternoon, Biden will deliver remarks on “the economy and lowering prices for the American people,” according to the White House, his last scheduled speech before heading to Nantucket for the holidays.
All is far from lost for Biden.
Experts like Zandi believe that inflation will fix itself, more or less, in the medium term.
“I think the figures for November and December will look pretty ugly, but early next year we will start to see much better inflation statistics, and by this time next year we will no longer be talking about inflation,” he predicted.
But by this time next year the midterm elections will be over. If high inflation continues for even a few more months, it will increase voters’ perceptions of that contest.
If prices continue to rise for Americans, the cost to the president and his party is likely to be just as high.
The Memo is a column reported by Niall Stanage.