Is inflation Biden’s fault?
President Joe Biden’s standing with voters has taken a beating on multiple fronts. He is perceived as not focusing on issues they care about, particularly inflation.
Inflation is a president slayer. Richard Nixon imposed wage and price controls. When they were lifted, prices soared even higher. Would Nixon have been removed over Watergate if the economy had been better?
Gerald Ford issued red and white lapel pins proclaiming “WIN,” which stood for “Whip Inflation Now.” Inflation was unimpressed. Ford got whipped by Jimmy Carter in the 1976 election.
Inflation dogged the Carter presidency as well. Carter did eventually appoint a determined inflation hawk, Paul Volcker, to lead the Federal Reserve. He threw the nation into recession by hiking interest rates. Ronald Reagan defeated Carter in 1980.
Does Biden deserve the blame for inflation? Not to the degree people are saying.
Senate Republicans held a press conference in July blaming the “insane tax and spending spree of President Biden and the Democrats for six straight months of raging inflation.” In December, Sen. Mitch McConnell tweeted: “It is unthinkable that Senate Democrats would try to respond to this inflation report by ramming through another massive socialist spending package in a matter of days.”
Whoa. Biden did pass a large COVID-19 bill early in his term, but the rest of the “socialism” Republicans are fulminating about did not pass.
Republicans are suddenly crying “socialism!” but let’s be fair. While the government has been pumping money into the economy at a record clip over the past 14 years, most of that has been the work of the Federal Reserve, and former President Donald Trump was the most vociferous proponent of easy money we’ve ever seen.
Since the financial crisis of 2008, the Federal Reserve has been shoveling money out the door with pitchforks, and in the wake of COVID-19, both the central bank and the federal government have been “dropping money from helicopters,” to use the image coined by Milton Friedman.
Many economists believe the Fed was right to do this as a response to the financial crisis of 2008. The controversy arises about when it was time to stop. Arguably, the Trump years were the right time. But that’s not what the Trump-led GOP favored.
Trump’s money gusher began in 2017 with the $1.9 trillion tax cut that wasn’t matched with any spending cuts.
Trump appointed Jerome Powell to the Fed but quickly soured on him when he didn’t increase the money supply quickly enough for Trump’s taste. Powell was soon on the receiving end of Trump tweets. He argued that “we need rate cuts and easing” (exactly the opposite of what we needed).
If Republicans were worried about inflation, they might have spoken up about Trump’s attempt to flood the economy with easy cash (to say nothing of eroding the norm about political influence on the Fed).
Then came COVID-19. Most people think the big federal cash infusion, the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, was a necessary response to the emergency. It saved many from destitution. But that money, combined with the trillions of dollars of quantitative easing and near-zero interest rates over the past decade and a half, certainly set the stage for inflation. Congress passed an additional $900 billion in December of 2020 — which Trump signed — for a grand total of over $3 trillion in COVID-19 relief.
Again, all of this money sloshed into the economy before Biden took the oath of office.
Was it wise for Biden to pass yet another COVID-19 relief package, the $1.9 trillion American Rescue Plan, in 2021? I don’t think so. But did it cause the inflation we’re experiencing now?
The annual inflation rate for most things Americans buy was already at the highest level in a decade before Biden entered the White House. And inflation is global. According to the Organization for Economic Cooperation and Development, inflation among its 38 member states is running higher than at any point since 2008.
So, even if Biden is only partially responsible for the inflation we’ve got, there are steps he can take. One would be to remove the Trump-imposed tariffs, which are taxes that raise the price of goods to Americans. Another would be to promote more legal immigration. We are suffering a severe labor shortage in all areas. More labor would ease bottlenecks at ports and in transportation. Make keeping schools open a priority. Remote learning has been terrible for kids, and many parents cannot work if their kids are not in school.
Biden should forthrightly address what’s on voters’ minds. He’s gotten tangled up in internecine fights with other Democrats over matters voters don’t know or care about and that he can’t even win. If they sense he’s not really engaged in controlling the inflation menace, it could well do to him what it has done to other presidents.