No Immediate Inflation Tools
Terry H. Schwadron
Nov. 13, 2021
What exactly do we want Joe Biden to do about price inflation for fuel and food other than wave a magic wand and make it go away?
Biden and allies think his proposed, big spending bill will bring down inflation — after a while. Republicans and Sen. Joe Manchin, the Democratic outlier in the Senate, are doubling-down on skipping spending bills altogether to let prices calm down, and, more generally, to increase stocks of oil and gas towards lower prices — after a while.
Meanwhile, there seems only to be the usual hyperbole and raised voices, apparently out of belief that no one has noticed that prices are rising faster than wages.
The hard truth to face is that there are not many White House moves that can fix this overnight. Blame Biden or anyone else of choice, wanting to tame temporary inflation without specific prices is a bit of a beast.
Among other things, blaming Biden for supply chain delays does not explain how the same thing is happening in countries all over the globe, for example, or the price of gas elsewhere. However Republicans might want to spin it, this outbreak of price hike is not just an American problem while this particular Democrat is in the White House.
Oddly, perhaps, administration voices are calling for caution, even about determining what is more systemic about the rising prices as compared with what are considered more temporary effects of covid recovery, including the snarl of deliveries of goods, and needed components through supply chain delays. The only thing clear here is that the uproar is as much about what looks like messaging about the immediate as it is about actually doing something. For a team supposedly elected to restore confidence, the reality is anything but that.
Meanwhile, we have the confusion of job reports showing lots of hiring and lowering unemployment at the same time as scarcities of goods prompting price rises for gas, heating oil, food supplies and used cars — together fomenting reports of the largest monthly price increases in three decades.
There is plenty of political heat on all sides, but little actual focus on what to do this week to scratch America’s impatient frustration for an answer by this afternoon.
Anti-Inflation Measures
Classically, there are a few government levers to pull, but they are unlikely to have immediate effect:
— The Fed can raise basic lending rates, squeezing money supply, towards forcing price stability. Actually, the Fed is talking about doing just that, and economists suggest there may be more than a single rate increase on the way, each of which also makes it more difficult to buy houses, get mortgages and other big purchases. Still, no one is talking about immediacy, but rather months from now.
— The government can increase supply of oil and gas, for example. Energy Secretary Jennifer Granholm said this week that Biden is considering tapping into the nation’s Strategic Petroleum Reserve amid rising crude oil prices. Biden already has called on OPEC to boost its output, an idea that the consortium of oil-producing countries has rebuffed. The supply chain backups have affected global oil prices, of course. That, in turn, has Team Biden underscoring the need to transition to renewable energy sources, and Republican opponents calling for more drilling right now, as if that would start within the next couple of hours.
— People can reduce demand, which seems improbable. Robust consumer demand has followed the ups and downs of covid, at the same time we have seen persistent supply shortages from covid-related factory shutdowns among overseas manufacturers. Of course, we can’t expect that people are going to shiver with cold to avoid heating oil bills, or that while we want air travel normalized, we don’t want higher fuel prices reflected in ticket prices. Rising U.S. wages are lagging those price hikes. The idea here is that Americans don’t care to study the reasons why, they just want their gas pump prices to stay the same.
The Biden Pitch
Government counsel for patience is falling on unwelcoming ears.
Corporate consolidations and heightened consumer demand have run into a blocked system blocked in its delivery systems. No one move is going to solve the puzzle, no single delay on a new spending bill for 10 years is going to remove current issues.
From exit polls in the elections in Virginia and New Jersey, voter dissatisfaction with these immediate economic realities were evident. Apparently in politics, gas and food prices matter more than deficits, national productivity figures or climate effect amelioration — or the ability of voters to focus on the main culprit in price instability — covid.
Biden is counting on voters believing that his big proposals to reduce and limit childcare costs, offer universal pre-kindergarten classes, and eventual prescription drug price reductions will offer offsets to the rising prices. The opponents say it is illogical to spend more government money now, that having done so through covid has put us into this inflationary price spiral.
Frankly, I’d like to hear Biden and opponents stop the happy talk and say out loud what they have in hand — or not — to address prices for even selected goods.
The sad fact is that the White House, regardless of its occupant, cannot control global oil prices or supply, or even unkink the supply chain by suddenly unloading hundreds of stalled ships with thousands of new truck drivers — and do so by the end of the week.
If there are actual, effective, practical immediate steps available from either side of the aisle, I’d like to hear more about them.
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