But its belated intervention will do little to immediately ease the pain.
That’s because soaring food prices and record gasoline bills represent a pernicious crisis that afflicts every American, while hurting those most who can least afford to meet the rising cost of living.
The economic storms are especially piercing to personal and national morale because they are piling on a nation already struggling to exit another unusually shared period of pain: a once-in-a-century pandemic.
And they are different from the more familiar anxieties brought on by a regular recession, when millions can lose their jobs but others may be untouched. Every American who eats or travels feels the pinch in this unpleasant period when everyone’s money is disappearing more quickly. And only adults who came of age in the 1970s and 1980s have any experience of the disorientating feeling of always running to catch up as the cost of everyday life seems to go up almost every day.
Beyond the Washington blame game, the most important story lies in the frustration unfolding outside the capital, where families are trimming supermarket bills and using a chunk of their wages just to drive to work.
That frustration translates to very real political consequences. The universal nature of the consequences of high inflation and the inability of either Biden or the Federal Reserve to quickly turn it around make this a rare and intractable challenge for the party in power.
And given that his White House insisted for months that inflation was a temporary and unique post-Covid-19 side effect, and the Fed was sluggish in addressing the approaching inflation superstorm, the government’s credibility is in deep question.
If it didn’t predict this problem, why should Americans believe it can fix it?
Questions about whether the White House understands the economy
While the Fed is expected to make an emergency hike in interest rates of three-quarters of a percentage point on Wednesday, many economists fear its earlier restraint may now force it to throw the economy into a recession to stem surging prices.
A strategy of higher interest rates won’t be painless for Americans either. It will become more expensive, for example, to borrow to buy cars or homes.
The unpalatable economic environment has left Biden in an especially unenviable political position and offered an opening to Republicans, who are hammering away at the elevated cost of living heading into November’s congressional elections. The President made yet another attempt on Tuesday to convince the country that he gets it and cutting inflation is his number one priority.
“So gas is up and food is up, which we’re going to get down come hell or high water,” Biden said, addressing labor unions in Philadelphia. “Inflation — it’s sapping the strength of a lot of families,” he admitted.
But given that inflation and gasoline prices are being driven by forces often outside the President’s control, he looks powerless — always a danger for a commander in chief. And the inflationary cycle puts Democrats in a weak political position only five months before the midterms. Similarly, Biden’s recitation Tuesday of steps that he’s taken to save the economy — such as the American Rescue Plan, which helped millions of Americans get back to work after the pandemic, and his bipartisan infrastructure law — is unlikely to get much traction among voters struggling to fill up their gas tanks.
Nuanced arguments made by the White House about how the administration has actually presided over a remarkable economic renaissance also sound discordant.
National Economic Council Director Brian Deese, for instance, acknowledged in an interview with CNN’s Victor Blackwell on Tuesday that there were “real challenges,” including high prices.
But he insisted: “We are moving out of what has been the strongest economic recovery in modern American history to what can be a more stable period of growth, where we don’t have to sacrifice all those economic gains.”
It could get worse
For miserable Americans — and Biden’s political number crunchers — there’s little prospect of quick relief. Oil price shocks caused by the war in Ukraine and the possibility of a ruined harvest there, in one of the world’s top breadbasket nations, could cause new problems in the coming months.
As prices tick up, there is also bound to be more scrutiny over whether the Biden administration’s policies were partly to blame. When inflation was clearly caused by supply chain blockages from the pandemic, the shutdown of manufacturing bases in Asia and suddenly rising demand and diminished supply as America reopened, it was credible to say the health crisis was largely to blame. Similarly, Biden’s success in corralling Western nations into a punishing menu of sanctions, which have cut Russian energy from global markets, were partly to blame for the rise in oil prices.
But at the same time, early in his presidency, Biden injected trillions of dollars into the economy in his pandemic rescue package and infrastructure spending, which is now getting a much closer look. Former Treasury Secretary Larry Summers warned for months that his fellow Democrats in the White House, plus the Federal Reserve, were being complacent about the risk of inflation. He suggested that big stimulus programs could overheat the economy. Now it looks like he was right. His current outlook doesn’t offer much comfort to the White House either.
“I think when inflation is as high as it is right now, and unemployment is as low as it is right now … it’s always almost been followed within two years by … recession,” Summers said on CNN’s “State of the Union” on Sunday.
“I look at what’s happening in the stock and bond markets. I look at where consumer sentiment is. I think there is certainly a risk of recession in the next year.”
In his speech on Tuesday, Biden criticized Republicans for blocking programs that would cut costs in health care, energy and education and would ease the overall financial burden on Americans — even though his plan foundered in the Senate at the hands of a member of his own party worried about inflation, West Virginia’s Joe Manchin.
Biden is also blowing political smoke by attacking the profits of massive oil firms and demanding that corporations pay their fair share in taxes. And he’s beseeching Americans, after years of grinding national crisis, for patience.
“I truly believe we’ve made extraordinary progress by laying a new foundation for our economy, which becomes clear once global inflation begins to recede,” Biden said on Tuesday.
The problem is, millions of Americans are not yet seeing that with their own eyes.
