The Biden Inflation Pitch
Terry H. Schwadron
May 11, 2022
If Americans are voting this year based on their pocketbooks, the stubbornness of high prices and inflation will dictate an angry rejection of Democrats.
If the very same voters think that replacing a slim Democratic congressional majority with a Republican group, they should look closer because there’s no indication that result will follow.
The factors driving high prices for gas, food and manufactured goods that is outpacing any wage growth over the last year are basically non-partisan. Yes, you can choose to blame Joe Biden’s energy policies for a piece of gas, which hit record highs yesterday, but far less than the global effects we still see from fouled supply lines bequeathed us by continuing covid problems, a war in Europe, various outbreaks of corporate greed, and, of course, on our own consumer insistence that goods and services should not be costly.
Biden took to his podium on Tuesday in what appears to be a futile attempt to persuade that his plan to lower specific costs will make things easier for the average U.S. family. Between what Congress won’t pass, however, and the breadth of bad economic effects we measure ceaselessly, taken together these are programs that will hit at the edges to make things more palatable and not a solution to inflation. In fact, see this pitch from Biden as his version of politicking with not much of a target.
The real levers for inflation control have fallen to the Federal Reserve, whose moves in the last weeks to raise basic borrowing rates towards a long-term balancing of prices and wages has spawned its own problems of volatile financial markets. Throw in various state attempts to make things look better in time for November elections with gas tax holidays and the like, and you see a pastiche of attempts that will fall short of a fix.
Meanwhile, Americans are freaking out over U.S. price hikes that are running at 8.5% year over year while we see inflation running at two, three or six times worse in other countries, including Argentina.
Inflation Turns Political
Network news runs almost daily interviews with the guy at the gas pump ruing high prices, as if that suggests what to do about a global energy market that operates independently of any White House policy. Instead, it becomes a political story about dissatisfaction with the Biden administration.
Here’s what the White House has to say for itself: “The United States is in a stronger economic position than any other major advanced economy in the world. At the same time, inflation is too high and is putting a strain on working families. The President’s top economic priority is tackling inflation and reducing costs for American families.”
Republicans say simply that had Biden not stopped the Keystone Pipeline project carrying Canadian oil to the Gulf for export globally and had expanded fossil fuel drilling, we’d be in better shape. Both are doubtful, given even a cursory look at the data. Drilling takes years, and even the biggest oil companies are looking to invest in solar and wind energies.
Indeed, Republicans seem without substantial plans for the economy outside of an 11-point outline from Sen. Rick Scott (R-Fla.), who wants to cut Social Security, Medicare and tax people currently not earning enough to pay taxes — an outline that even Senate Minority Leader Mitch McConnell has rejected.
Meanwhile, experts and economists seem to agree that the U.S. economy fundamentals are in good order, with 500,000 new jobs on average being added, unemployment low, a still-successful financial market and investments towards record growth standards. But prices remain high, either because “consumers have too much money,” which sounds like a joke, or because Biden moves too much covid aid into the systems during a pandemic that prompted lockdowns. Bloomberg News notes that Biden’s intervention comes as skyrocketing prices leave Americans increasingly pessimistic about their finances despite strong job growth.
The standard truths here suggest that it will take time to work through this period. American politics does not allow for time for problem-solving and relies instead on emotion. The emotion this year is anger. Shouldn’t we be asking for answers rather than targeting anger?
The Biden Plan
Here’s the Biden plan. You can judge whether it addresses the fundamental issues.
— Gas prices. In addition to releasing strategic oil reserves over six months, Biden has asked the Environmental Protection Agency to allow use of E15 gasoline that uses 15% ethanol to be sold to expand Americans’ access to an affordable fuel supply amid the surge in gas prices. Biden also wants Congress to make companies pay fees on idled wells and non-producing acres of federal lands, and he wants Congress to pass “clean energy and vehicle tax credits and investments” to reduce U.S. dependence on “reckless autocrats like Putin.”
— Drug prices. Biden wants Congress to lower prescription drug and health care costs by addressing a glitch in the Affordable Care Act affecting a tax credit and to allow Medicare to negotiate drug prices, capping insulin costs, penalizing drug companies that raise prices faster than inflation. Congress has shown limited interest.
— Food. Biden wants resources to helping American farmers to boost food production and to crack down on illegal price fixing and enforce the antitrust laws in the meat and poultry processing industries.
— Supply chains. Biden asks us to look kindly on the efforts to wed efforts by business, labor, federal and state governments to address supply chain bottlenecks at ports, add truck drivers, challenge unfair practices by global shipping companies. It is hard to see the progress that White House claims make.
— Childcare. Biden has been asking Congress to invest in ameliorating the cost of childcare and long-term care, saving families thousands of dollars per year. There has been little congressional action,
— Housing. The president wants a recalcitrant Congress to invest in building more than 1 million affordable homes, including through a set of tax credits that have received bipartisan support.
All these take time. Not mentioned: dropping international tariffs created by the Donald Trump administration that have done little but add cost to a range of goods. That actually is something Biden could do. What is apparent is how little control the president, any president, has over prices without significant and long-term policies.
Public anger towards Biden may feel good, but hardly solves anything.
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