Inflation Number One Voting Issue
Democrats are seeing their mid-term election hopes sink as fast as inflation rises. They are facing near-record low approval ratings five months before the critical congressional contests. The White House is now focusing on taming inflation.
Biden’s team has been accused of being caught by surprise by runaway inflation. They originally called it ‘transitory.’ Biden sought to pin blame for higher gas prices on Russia’s invasion of Ukraine. Biden labelled the sticker shock “Putin’s price hike.” And he accused Republicans of resisting his efforts to bring costs down. Republicans countered that Biden’s $1.9 trillion coronavirus relief package was to blame. It caused inflation by pumping too much money into the economy.1
Gas and food prices are expected to keep rising. Consumer prices are now 8.3% higher than a year ago. That’s four times higher than the Federal Reserve’s target. Biden twice ordered the release of oil from the U.S. strategic reserve. But it had almost no impact on gas prices.
Truth of the matter is, there is little Biden can do in the short term to bring prices down. He conceded the economy is in a precarious state. But, he maintains, a recession isn’t inevitable.
Biden’s excuses seem to be landing on deaf ears. A Gallup poll released today shows most voters say the government isn’t doing enough to fight inflation. Only 14% of Americans rate economic conditions as “excellent” or “good”. Meanwhile, 39% call conditions “only fair” and a whopping 46% call the economic state of the country “poor”. Those numbers represent a worsening of public opinion compared to a poll taken just a month ago.2
Biden’s Plan
In a Wall Street Journal Op-Ed, Biden outlined a three-part proposal to right the economy.3
His primary focus is supporting the Fed in taming inflation. Biden is meeting with Federal Reserve Chairman Powell and Treasury Secretary Janet Yellen today. Biden pledged not to interfere in the Fed’s decision making. He suggested that he and Powell are in alignment on dealing with inflation.
Powell has been criticized for responding too slowly to rising inflation. Almost in response to that criticism, Powell has vowed to swiftly raise interest rates. The Fed’s goal is to cut consumer demand. This, in turn, will cut inflation. They have signaled more aggressive rate hikes are coming. Higher rates could raise unemployment and push the country into recession. Recession concerns have caused sharp drops in stock prices. What the Fed has not forecasted is when inflation may begin to ease.
The second proposal contained a list of goals. These include upgrading infrastructure and boosting housing production. As well as lowering drug prices and fixing disrupted supply chains. And the third piece of Mr. Biden’s proposal calls for reducing federal budget deficits. Realistically, though, the second and third proposals are the same ones that have been stuck in Congress since he got elected.
Biden tried to sugar coat his distasteful economic forecast. He claims to have presided over the most robust recovery in modern history. According to his statistics, the job market has the fastest decline in unemployment on record. And that, for the first time since 1976, the U.S. economy may grow faster this year that China’s. However, that unemployment decline followed the record increase from the pandemic. He also did not mention that China’s economy has been under an incredibly strict Covid lockdown for months.
This self-congratulation was build-up to his spin on future economic decline. He indicated that the record-setting pace of job creation in the aftermath of the pandemic would slow dramatically. Biden predicted a more moderate level of 150,000 jobs per month from 500,000. He said, “It will be a sign that we are successfully moving into the next phase of recovery—as this kind of job growth is consistent with a low unemployment rate and a healthy economy.” Job loss is a good thing, apparently, unless it’s yours.
Biden and the Democrats know the economy is a weight around their necks that will sink them in the upcoming elections. But they also know that there is practically very little they can do about it. Biden may believe it when he says, “the U.S. can transition from recovery to stable, steady growth and bring down inflation without giving up all these historic gains.” Faced with prices that continue to rise with no end in sight, Americans are choosing to believe otherwise.
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