The political conversation on inflation, however, is not very good. In fact, it’s largely a charade, with enough artifice to get around all the actors involved.
These dramatic allegations have put the GOP in a strong position for midterm election gains this fall. But on the merits, they omit a lot of conflicting evidence.
The resulting inflation unquestionably caused economic hardship for millions of families, eroding the purchasing power of higher wages. At the same time, they have not been ‘crushed’ enough to prevent them from spending at a sustained pace.
This is because families up and down the income scale, thanks to Covid relief checks, usually have even more money than before the pandemic; in the jargon of economic analysts, “household balance sheets” still have “excess savings”. Unemployment has fallen back below 4%.
“Excess savings have been sufficient to cushion the impact of falling real wages on spending, even for low-income households,” said Moody’s chief economist Mark Zandi. “U.S. households are mostly in good financial shape.”
Biden’s White House wasn’t alone last year in believing inflation would be short-lived. The same was true for the Federal Reserve, the government agency responsible for monitoring and controlling inflation through the management of monetary policy.
The role of the media is always to hold the government accountable. But the unelected and relatively obscure Fed does not hold daily press briefings.
The White House, home to the most visible official of all, does. So reporters continually ask the president about solutions to rising prices, even though, in a free-market economy, no White House has much power to bring them down.
The role of the President is to answer questions. For disgruntled voters, “there is not much I can do” is not enough.
Presidents are feeling particular pressure to provide an answer on rising gas prices. Rising numbers on signs posted at the pump — determined by oil supply and demand — have voters particularly furious.
While the inflation debate may be largely wrong, it is not entirely wrong. Presidential policies can make inflation worse.
Presidents can also temper inflation, if only marginally. The administration’s efforts to ease price pressures by helping to smooth out supply chains are helping a little. The same goes for the record release of oil from the Strategic Petroleum Reserve.
The Fed Chairman he inherited was Jerome Powell, a Republican appointed to the post by Trump. President Barack Obama first recruited Powell to the Fed board in 2011.
Late last year, Biden decided to keep Trump’s president in place. On May 12, 80 of 100 senators — including overwhelming majorities of Republicans and Democrats — voted to confirm the president’s choice.