If you were naïve enough to convince yourself that the Biden White House understands the political peril rising inflation rates represent to Democratic prospects in November, the administration wants to disabuse you of that notion.
The Biden administration is pivoting. No longer will it treat rising consumer prices as an urgent matter of utmost concern to most American voters. Instead, it’s going to handle the issue as it would any other political football. Rather than focus on Biden’s own modest efforts to provide relief to Americans who have seen their basic costs of living skyrocket over the last year, the administration will now try to convince you that Republicans don’t know what to do about it either.
Joe Biden “is not expected to announce new policy measures in the speech” the president will devote to inflation on Tuesday, Reuters reported. On the contrary, the president “is expected to sharpen his attacks on Republicans.” Specifically, Joe Biden will hand his Republican opponents a microphone to explain how they would rein in the costs of living in the United States.
To give you some idea of what a spectacular blunder this could be, one White House official who requested anonymity provided a helpful quote: “Republicans love to use inflation as a political talking point, but does anyone have a clue what their plan is to bring down prices?”
The most generous reading of this comment is that it is a terribly shortsighted admission against the White House’s own interest. Sure, we don’t have any idea what to do about inflation, but neither do they! This provides the GOP with two distinct advantages. First, it cedes to the Republican Party command of the policy conversation around inflation, and, second, it exposes the extent to which the Biden administration has found itself lost at sea.
The first thing Republicans who understand the issues should explain is what the Biden White House should not have done. Inflation is a fiendish phenomenon without a monocausal explanation. It was exacerbated by Covid-19’s impact on labor markets and supply chains, both at home and abroad. Moreover, foreign crises have contributed to a condition typified by too much money chasing after too few goods. But the Biden administration’s decision to pursue a nearly $2 trillion Covid relief package at a time when the economy was already recovering from the depths of the pandemic contributed to America’s economic malaise.
Depending on whom you ask, the American Rescue Plan contributed as little as half a percentage point to inflation or as much as two to four percentage points. Almost no one still clings to the administration’s preferred narratives—that inflation would be transitory and perceptible only in a handful of sectors of the economy.
The second thing Republicans get to say is that this White House has condemned the American economy and all who participate in it to suffer for the Democrats’ sins. At the state level, Democrats have toyed with various gimmicks to relieve the pressure on American wallets—from slashing sales taxes on essential goods to providing rebates to combat gas prices. But, as the New York Times aptly notes, putting more money in the public’s wallets makes inflation worse by preserving the rates of demand that produced high prices in the first place.
New York Federal Reserve President John Williams doesn’t seem all that flummoxed as to what policy prescriptions might “restore price stability” in the near term. “Our monetary policy actions will cool the demand side of the equation,” he said. In other words, we cannot rely on high prices alone to serve as the cure for the ills of high prices. Higher interest rates will reduce the imbalance presently making everything from labor to durable goods more expensive, but only by further reducing your purchasing power.
No one likes to say the “R” word, but that’s what economists like former Treasury Sec. Larry Summers say is necessary if we’re going to restore the economic status quo ante. “I think the likelihood is that we will not return to 2 percent inflation without having at least a mild recession,” he recently told Times columnist Ezra Klein.
If the Democrats, who have controlled every lever of elected government in Washington for the last 16 months, think they can transfer some of the blame for these lamentable conditions onto their opponents, they’re either underestimating your intelligence or wildly overestimating their own. The White House’s political strategy seems to be to throw their hands up in dismay while suggesting that Republicans might have a better solution to a problem so urgent that it has become the single prohibitive issue on which the midterm elections will hinge. In this, voters may find themselves in perfect agreement with Democrats.