Rising prices are a threat to Biden’s plan
WASHINGTON >> At least once a week, a team of President Joe Biden’s top advisers meet on Zoom to address the nation’s supply chain crisis. They discuss ways to relieve backlogs at U.S. ports, ramp up semiconductor production for struggling automakers and swell the ranks of truck drivers.
The conversations are aimed at one goal: Taming accelerating price increases that are hurting the economic recovery, unsettling American consumers and denting Biden’s popularity.
An inflation surge is presenting a fresh challenge for Biden, who for months insisted that rising prices were a temporary hangover from the pandemic recession and would quickly recede. Instead, the president and his aides are now bracing for high inflation to persist into next year, with Americans continuing to see faster and sustained increases in prices for food, gasoline and other consumer goods than at any point this century.
That reality has complicated Biden’s push for sweeping legislation to boost workers, expand access to education and fight poverty and climate change. And it is dragging on the president’s approval ratings, which could threaten Democrats’ already tenuous hold on Congress in the 2022 midterm elections.
Recent polls shows Americans’ concerns over inflation are eroding their economic confidence and dimming their view of Biden’s performance. National surveys by CNBC and Fox News show a sharp decline in voter ratings of Biden’s overall performance and his handling of the economy, even though unemployment has fallen quickly on his watch and economic output has strengthened to its fastest rate since Ronald Reagan was president. Voter worry over price increases has jumped in the last month.
Administration officials have responded by framing Biden’s push for what would be his signature spending bill as an effort to reduce costs that American families face, citing provisions to cap child care costs and expand subsidies for higher education, among other plans. And they have mobilized staff to scour options for unclogging supply chains, bringing more people back into the workforce, and reducing food and gasoline costs by promoting more competition in the economy via executive actions.
“There are distinct challenges from turning the economy back on after the pandemic that we are bringing together state and local officials, the private sector and labor to address so that prices decrease,” Kate Berner, the White House deputy communications director, said.
Biden’s top officials stress that the administration’s policies have helped accelerate the U.S. economic rebound. Workers are commanding their largest wage gains in two decades. Growth roared back in the first half of the year, fueled by the $1.9 trillion economic aid bill the president signed in March. The country’s expansion continues to outpace other wealthy nations.
Inflation and shortages are the downside of that equation. Car prices are elevated as a result of strong demand and a lack of semiconductors. Gasoline has hit its highest cost per gallon in seven years. A shift in consumer preferences and a pandemic crimp in supply chains have delayed shipments of furniture, household appliances and other consumer goods. Millions of Americans, having saved up money from government support through the pandemic, are waiting to return to jobs, driving up labor costs for companies and food prices.
Much of that is beyond Biden’s control. Inflation has risen in wealthy nations across the globe as the pandemic has hobbled the movement of goods and component parts. Virus-wary consumers have shifted their spending toward goods rather than services, travel and tourism remain depressed, and energy prices have risen as demand for fuel and electricity has surged amid the resumption of business activity and some weather shocks linked to climate change. But some economists, including veterans of previous Democratic administrations, say much of Biden’s inflation struggle is self-inflicted. Lawrence H. Summers is one of those who say the stimulus bill the president signed in March gave too much of a boost to consumer spending, at a time when the supply-chain disruptions have made it hard for Americans to get their hands on the things they want to buy. Summers, who served in the Obama and Clinton administrations, says inflation now risks spiraling out of control; other Democratic economists agree there are risks.
“The original sin was an oversized American Rescue Plan. It contributed to both higher output but also higher prices,” said Jason Furman, a Harvard economist who chaired the White House Council of Economic Advisers under President Barack Obama.
That has some important Democrats worried about price-related drawbacks from the president’s ambitious spending package, complicating Biden’s approach.