Biden has long-term inflation plan, but voter patience short
WASHINGTON — President Joe Biden came into office with a plan to fix inflation — just not the particular inflationary problem that the country now faces.
His belief is that a cluster of companies control too many industries, which reduces competition for both customers and workers. That leads to higher prices and lower wages in what the White House says is an average cost of $5,000 annually for U.S. families. Biden is now trying to remedy the situation with 72 distinct initiatives — everything from new rules for cell phone repairs to regulations on meatpacking to more merger reviews.
“The dynamics of the modern American economy — the increased consolidation and lack of competition — has distorted market incentives in important ways,” said Brian Deese, director of the White House National Economic Council. “The president gave us the direction that he wanted us to come back and say what could we do to address this issue of consolidation across industries in a way that would be durable.”
But even administration officials acknowledge that the initiatives outlined by the president’s seven-monthold competition council aren’t designed to quickly stop the 7.5% inflation that’s frustrating Americans and damaging Biden’s popularity. Furthermore, business groups dispute the fundamental premise that competition has faded within the U.S. economy and they are prepared to challenge the administration’s new initiatives in court.
“It will strangle economic growth,” said Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce. “Ironically, what this will do is actually lead to more inflation.”
Part of Biden’s dilemma is that reorienting a bureaucracy to promote competition takes time, and voters want to see inflation — running at a 40-year peak— start dropping now. Voters feel the bite of inflation with every trip they make to the grocery store or the gas station, yet the president is traveling the country to discuss solutions such as competition and new infrastructure that predate the current predicament and would have a much more gradual impact.
America’s current inflation woes stem from the pandemic. Supply chains for computer chips, clothes, furniture and other goods are under stress. At the same time, consumer demand has surged after a historical amount of government aid flowed into the economy. Despite efforts to get the kinks out of the supply chain, price increases have stayed high in recent months instead of fading as many initial forecasts suggested. That has the Federal Reserve ready to increase interest rates to lower inflation.