Persistent inflation threatens Biden's agenda

WASHINGTON – At least once a week, a team of President Biden’s top advisers meets on Zoom to respond to supply chain crisis . They are ...


WASHINGTON – At least once a week, a team of President Biden’s top advisers meets on Zoom to respond to supply chain crisis. They are discussing ways to reduce backlogs at U.S. ports, increase semiconductor production for struggling automakers, and swell the ranks of truck drivers.

The conversations are focused on one goal: to contain the accelerating price hikes that are hurting economic recovery, disrupting U.S. consumers and shaking Mr. Biden’s popularity.

a inflation surge presents a new challenge for Mr Biden, who insisted for months that the price hike was a temporary hangover from the pandemic recession and would recede quickly. Instead, the president and his aides are now bracing for high inflation to persist next year, as Americans continue to see faster – and sustained – increases in the prices of food, gasoline and more. other consumer goods than at any time of this century.

This reality complicated Mr. Biden’s pressure to radical legislation to stimulate workers, expand access to education and fight poverty and climate change. And he lags on the approval ratings of the president, who could threaten Democrats’ already tenuous hold on Congress in the 2022 midterm elections.

Recent polls show that Americans’ concerns about inflation are eroding their economic confidence and clouding their view of Mr. Biden’s performance. National surveys by CNBC and Fox News show a sharp drop in voter scores on Mr Biden’s overall performance and his handling of the economy, even as unemployment fell rapidly under his watch and economic output strengthened to its fastest rate since that Ronald Reagan was president. Voters’ concern over price increases surged last month.

Administration officials responded by defining Mr. Biden’s push for what would be his signature spending bill as an effort to reduce the costs American families face, citing provisions to cap fees childcare and increasing subsidies for higher education, among other plans. And they mobilized staff to explore options to unblock supply chains, get more people back into the workforce, and lower food and fuel costs by fostering greater competition in the workplace. ‘economy. via executive actions.

“There are distinct challenges to getting the economy back on track after the pandemic as we bring together state and local officials, the private sector and workers – so prices come down,” said Kate Berner, deputy director of communications at the White House, in an interview.

Senior Biden officials point out that the administration’s policies have helped accelerate the US economic rebound. Workers order their biggest salary gains in two decades. Growth roared in the first half of the year, fueled by the $ 1.9 trillion economic aid bill the president signed in March. America’s expansion continues to overtake other wealthy nations around the world.

Inflation and shortages are the downside to this equation. Car prices are high due to high demand and lack of semiconductors. Gasoline hit its highest cost per gallon in seven years. A shift in consumer preferences and a pandemic crimping in supply chains have delayed shipments of furniture, appliances and other consumer goods. Millions of Americans, having saved money through government support during the pandemic, are waiting to return to work, pushing up labor costs for businesses and food prices at many restaurants.

Much of this is beyond Mr. Biden’s control. Inflation has risen in wealthy countries around the world, as the pandemic has hampered the flow of goods and components between countries. Distrustful consumers have shifted their spending towards goods rather than services, travel and tourism remain depressed and energy prices have risen as demand for fuel and electricity has increased as part of the recovery. commercial activity and certain weather shocks linked to climate change.

But some economists, including veterans of previous Democratic administrations, say much of Mr. Biden’s fight against inflation is self-inflicted. Lawrence H. Summers is among those who say the stimulus bill the president signed in March gave too much help to consumer spending, at a time when supply chain disruptions have made it difficult for Americans to get their hands on the things they want to buy. Mr Summers, who served in the Obama and Clinton administrations, says inflation is now at risk of spiraling out of control and other Democratic economists agree there are risks.

“Original Sin was an oversized American bailout. This has contributed both to higher production but also to higher prices, ”said Jason Furman, a Harvard economist who chaired the White House Council of Economic Advisers under President Barack Obama.

This worries some prominent Democrats about the price drawbacks of the president’s ambitious spending program, complicating Mr Biden’s approach.

West Virginia Senator Joe Manchin III, a centrist, has repeatedly cited soaring inflation as insisting that Mr Biden reduce what had been a $ 3.5 trillion effort to extend the safety net social.

Mr Biden has attempted to argue that investments in his spending bill will moderate price increases over time. But he struggled to identify the things he can do right away to ease the pain highly publicized price spikes, such as gasoline. Some in his administration have lobbied to mobilize the National Guard to help decongest ports teeming with imports awaiting delivery to consumers across the country. Mr Biden raised the possibility of tapping the strategic oil reserve to modestly increase oil supplies, or negotiating with oil producers in the Middle East to ramp up.

At a CNN town hall last week, Mr Biden conceded the limits of his power, saying, “I have no short-term answer” to bring down gas prices, which he does not know. don’t expect to start declining until next year.

“I don’t see anything happening in the meantime that will significantly reduce gas prices,” he said.

Janet L. Yellen, Secretary of the Treasury, told CNN’s “State of the Union” on Sunday that she expects the headline inflation rate to improve “by the middle to the end of the year. next, the second half of next year “.

With an American audience that has spent nearly 40 years without seeing – or worrying about – inflation, the question offers an opening for the opposition. Republicans have reversed the price spike into a weapon against Mr. Biden’s economic policies, warning that increased spending would exacerbate the pain of ordinary Americans.

“It’s everywhere,” said Representative Kevin Brady of Texas, the Ways and Means Committee’s top Republican, in an interview. “You can’t live your life without seeing your paycheck buy less. “

White House officials have been monitoring inflationary pressures for months. They remain convinced, as they were in April, that price hikes are not going to get out of hand and force the Federal Reserve to sharply raise interest rates, which could dampen growth.

The president and his senior advisers remain confident that price growth will start to decline well before the mid-term. They defend the scale of the bailout and say Americans are currently focusing on inflation because the success of the stimulus bill has sped up economic and jobs growth and sidelined a bigger problem – the availability of jobs for those who want them.

“It is a very incomplete view to try to assess the economy, and even people’s opinions on the economy, by looking only at inflation,” said Jared Bernstein, member of the Council of Economic Advisers at M Biden, in an interview. “You also have to appreciate the robustness of the expansion and the way it increases employment and income opportunities. “

Bernstein and other advisers say many of the causes of inflation are already improving. They cite calculations by Mark Zandi, an economist at Moody’s Analytics, which suggest that Americans who have left the workforce will start returning to the workforce en masse by December or January, as they will likely have used up their savings. by then.

The advisers also continue to explore other measures they could take, including efforts to increase the number of truck drivers near ports and to impose lower prices and more competition in the food industry.

“We are always on top of everything,” Ms. Berner said.

To which many officials add a caveat: Almost anything the White House could do now will take time to bring prices down.

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Newsrust - US Top News: Persistent inflation threatens Biden's agenda
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