Economists predict that inflation, now at a 31-year high, and will remain elevated for at least another year.
That means more pain in the pocketbook for average Americans, who’ve already taken a financial hit due to rising costs. Although labor is scarce and wages are rising, real average earnings have declined 1.6% over the past year. Prices for gas, food, heating, and other household essentials are nearing record highs. And any savings people have are declining in value.
These inflationary winds—blowing at a rate of 6.2% year-over-year in October — are particularly blustery for Democrats, who control Congress and The White House, and are inevitably blamed by many Americans for the current economic distress. Only 39% of Americans approve of President Joe Biden’s handling of the economy, according to a recent Washington Post/ABC survey—that’s despite his $1.2 trillion infrastructure package and the increasingly likely passage of his trillion-plus dollar social spending deal.
The poll results signal a dark reality for Democrats as they enter the 2022 midterm election season: Nearly half of Americans overall and political independents blame Biden for inflation, and Republicans are grabbing onto that message.
“There’s no relief in sight. It’s a direct result of flooding the country with money,” Senate Minority Leader Mitch McConnell (R-Ky.), told reporters last month, blaming Biden’s infrastructure bill for the shift in inflation. “The last thing we need to do is pile on with another massive, reckless tax and spending spree.”
Republicans on Twitter have started using the hashtag, #ThanksgivingTax, in an attempt to associate higher priced Thanksgiving meals with Biden and other Democrats. The holiday meal will cost an extra 14% this year, according to the farm lobby.
“Due to President Biden’s failed economic policies, the cost of Thanksgiving dinner will be at an all time high. American families deserve better. #ThanksgivingTax,” wrote Rep. Dan Meuser (R-Penn.)
But in reality, most economists (on the left and right) agree that Biden’s policies have little to do with rising inflation. Analysts at Moody’s Analytics and Fitch Ratings say that the bill has no impact on the increasing prices because the money from it won’t begin to flow into the economy until 2022, and due to its decade-long rollout and revenue-raising offsets.
The White House blames supply chain snags caused by COVID-19 and the consolidation of businesses during the pandemic for higher prices. Recently, the Biden administration has signaled that they might go on the offense and blame large companies for passing increased prices on to consumers even as their profits rise.
Biden indicated as much this month when he urged the Federal Trade Commission to further investigate any anti-competitiveness in the oil and gas industry, which he said was causing higher gasoline prices.
“The price of gasoline on the wholesale market has fallen by about 10% over the last few weeks,” said Biden on Tuesday afternoon at a press conference meant to address increasing prices while promoting the White House’s economic efforts. “But the price at the pump hasn’t budged a penny. In other words, gas supply companies are paying less and making a lot more and they do not seem to be passing that on to consumers at the pump.”
Still, when it comes to actually addressing the realities of inflation, there’s little Biden can actually do. The president announced yesterday that he would nominate Federal Reserve Chairman Jerome Powell to helm the central bank for another term.
Powell, who is in charge of the politically independent agency, could raise short-term interest rates to offset higher prices. During the COVID pandemic, and the Trump era, he lowered rates and bought assets to push more money into the sinking economy. Economists argue those actions could have led to inflation, but Powell claims that the plan is only temporary and the need to keep the economy afloat outweighs any fear of slight inflation.
Biden has used his executive power to ease supply chain problems at ports and he’s met with the CEOs of large retailers asking them to stock their shelves quickly to meet demand. He also announced today that he would release oil from the nation’s Strategic Petroleum Reserve, but the impact on gas prices will likely be minimal. “While our actions will not solve the problem of high gas prices overnight,” the president said Tuesday, “it will make a difference over time.”
He could lift tariffs created by President Trump on Chinese imports, but the implications on global relations would outweigh any fix to inflation, geopolitical experts say.
In any case, the president doesn’t control the Federal Reserve and can’t force Powell’s hand. As far as options go for inflation, a firm finger shaking at large corporations is about all he can do while reminding Americans of his other economic successes.
“Even accounting for inflation, our economy is bigger and Americans have more money in their pocket than they did before the pandemic. America is the only major economy in the world that can say that,” Biden said.
