For months last year, the White House said inflation was transitory. But higher prices for gas, groceries, and other day-to-day essentials had stuck around, cementing 2021 as a year when the coronavirus dug in and prices logged their highest increase since 1982.
President Joe Biden has said inflation will normalize toward the end of the year. Still, his administration blames business concentration for high prices, which jumped 7% year-over-year in December.
The president's strategy is in three parts, National Economic Council Director Brian Deese said Wednesday: “unsticking supply chains,” “protecting consumers,” and “promoting competition.” Deese also said provisions in the president’s sweeping trillion-dollar social spending framework, known as Build Back Better, would alleviate supply issues over time in areas such as housing or provide child care benefits that allow for greater workforce participation.
For example, the Biden administration is training its fire where it says consolidation is highest among meat producers. While it has not targeted the corporate sector overall, the auto industry is another sector where officials noted that short supply had prompted rising prices.
And it rejects the notion that higher demand, fueled by Democrats’ $1.9 trillion American Rescue Plan, is to blame or to be remedied with a move toward tighter fiscal policy.
“If car prices are too high right now, there are two solutions: You increase the supply of cars by making more of them, or you reduce demand for cars by making Americans poorer,” Biden said last week. “There’s a lot of people in the second camp. … I reject it.”
During an interview on Wednesday, Deese made a similar argument, telling MSNBC that car prices represented a third of the entire price increase that the Labor Department saw in December.
Deese said there are two ways to deal with this: reducing demand by making people poorer or building more cars.
Whether the Biden administration’s push to address prices with more supply and competition will drive down inflation isn’t evident.
There has been little change in corporate concentration as inflation spiked this year to a level not seen since 1982, and blaming monopoly power for this has drawn criticism.
“The emerging claim that antitrust can combat inflation reflects ‘science denial,’” tweeted economist Larry Summers, a senior official in the Obama and Clinton administrations, and an occasional thorn in Biden’s side on economic issues. “There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”
The North American Meat Institute said it faces the same challenges as the rest of the country, including labor shortages, increased energy costs, and supply chain bottlenecks. Automakers likewise face scarce labor and parts availability.
Others see massive government spending amid the coronavirus pandemic and policies set by the Federal Reserve Board as to blame.
“There’s way too much money sloshing around in the economy. And the reason for that is the massive amount of government spending and the very accommodative Fed policy” nine months behind the curve on fighting inflation, economist Stephen Moore told the Washington Examiner.
As for monopolies, Moore said this was improbable. “When [former President Donald Trump] left office, the inflation rate was 1.5%.”
If inflation persists, it could prove a political liability for the Democratic Party ahead of the midterm elections. Democrats hold a bare majority in the Senate and a narrow advantage in the House. So, Biden, whose job approval numbers are underwater, has little room to slip.
The president has said little outside his prepared remarks on his strategy to fight inflation.
In a statement on Wednesday, Biden ignored the 7% inflation jump in the Bureau of Labor Statistics consumer price index report, focusing instead on the slowing rate of price increases, including a .5% reduction in the growth rate in food costs last month.
These are among the bright spots for the administration: a booming economy that boosted jobs by 6 million last year and unemployment that fell to 3.9%.
Deese said such circumstances mean the United States is “well-positioned to attack the challenges of prices and costs head-on,” with the Build Back Better plan “providing a tax cut to families directly in their pocketbook and then reducing other of their most salient costs.”
The prospect of another big spending bill may not prove reassuring to voters rattled by the high prices they are confronting day after day.
“That's like giving a lung cancer patient a Marlboro,” Moore said. “One thing about inflation: It’s not spinnable. … People feel it. People see it. So, it doesn’t matter what the president says.”
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