Biden, Dems, Republicans suffer from inflation delusion
Republicans, the media and even President Joe Biden seem to be laboring under a common delusion that presidents can control prices.
They can’t, inconvenient though that may be.
Right-wing news media is full of segments suggesting Biden is personally responsible for spiking gas, grocery and car prices. On the Sunday shows, such Republican politicians as Sen. John Barrasso of Wyoming declared, “I would have never believed that Joe Biden, in just 10 months in the presidency, could bring us to a 30-year high of inflation.” It would be quite reasonable to “have never believed” that because this is not something a president can unilaterally do.
Even objective journalists have lobbed questions to administration officials about why the president hasn’t squelched inflation.
Let me be abundantly clear: Prices, and the pace of price increases, are driven by factors mostly outside a president’s control. Particularly right now.
The global pandemic has disrupted supply chains, including through worker shortages in factories, transportation, warehousing and retail.
Meanwhile, Americans have accumulated savings. That’s partly because there were fewer things to spend money on while large parts of the economy were effectively shuttered last year, and partly because the government provided generous fiscal support through several rounds of stimulus payments and other measures.
This cash is burning a hole in many consumers’ pockets. So, as long as such in-person services as travel or concerts remain somewhat risky, consumers are diverting more of that spending to physical goods — the same stuff that’s snarled by global supply-chain disruptions.
Higher demand + constrained supply = shortages and price spikes.
Much of the media coverage seems to assume Biden can pull a magic lever to make all these problems disappear. His inflation-fighting tools, though, are extremely limited.
He can continue some of the measures he’s already pursuing, such as facilitating coronavirus vaccinations, both here and in poorer countries, so more people worldwide can return to normal work and purchasing behaviors. He’s also nudging ports and logistics companies to streamline operations and extend hours.
There are other things the administration hasn’t yet tried.
It could, for example, accelerate the processing of immigrants’ visas and work permits, which are severely backlogged and contributing to worker shortages. Or Biden could release oil from the Strategic Petroleum Reserve, though that won’t affect prices much — the reserve is small and energy is a big global market.
He could also repeal more tariffs. Biden recently ended Trump-era tariffs on European steel and aluminum, but he replaced them with a quota system, so it’s not clear how much the prices U.S. manufacturers pay for metals will actually decline.
These measures would help. But they’re no magic bullet. And, in any event, the institution tasked with maintaining price stability is not the White House or even Congress. It’s the politically independent Federal Reserve.
Happily, the Fed has an effective medicine to kill inflation. Unhappily, that medicine — hiking interest rates — might also kill the patient, halt the recovery and toss us back into recession. Also not exactly desirable.
For months, Democrats mainly dealt with the rising economic and political risk of inflation by pretending it didn’t exist or that concerns were vastly overblown.
And, to be fair: In the spring, with vaccinations picking up and more people expected to return to work, economists were forecasting related supplychain problems to unwind soon — and for inflation to fall. The delta variant had other plans.
Now, realizing that high inflation may stick around, Democrats’ rhetoric is pivoting. Instead of arguing the inflationary threat isn’t real, or is exaggerated, Democrats now argue that, sure it’s real — and that, just as Republicans have suggested, Biden can fix it!
The cure, Democrats argue, is passing their large safety-net-and-climate bill. Biden has repeatedly claimed that 17 economics Nobel laureates said his bill would “reduce inflation” — though the laureates do not appear to agree with this. Senior administration officials also made a version of this claim repeatedly on the Sunday shows.
In truth, the bill’s likely effects on inflation are probably negligible. But it does lots of other good things, such as expanding access to health insurance coverage and investing in poor kids. Seems wiser to defend Biden’s agenda on the merits, rather than pretend it will do something it won’t, and can’t.