High inflation risks undercutting one of Biden’s central messages — that he has made life better for average Americans by creating millions of jobs, overseeing a jump in wages, creating new social programs and delivering millions of vaccines. That may be a harder case to make if many Americans see the prices of their groceries and other goods continue to climb.
In an appearance at the Port of Baltimore to promote his freshly passed bipartisan infrastructure bill, Biden took a distinctly sympathetic tone, noting the pain that consumers feel when they see rising costs for a gallon of gas or a loaf of bread. He suggested his agenda is the best way to lower costs for American families.
“We still face challenges, and we have to tackle them. We have to tackle them head on,” Biden said. “Many people remain unsettled about the economy, and we know why. They see higher prices. They go to the store or go online and can’t find what they want.”
But in the meantime, inflation presents a growing political problem. Polling suggests voters are anxious over growing costs. Sen. Joe Manchin III (D-W.Va.) — whose vote, like that of 49 other Senate Democrats, is key to enacting Biden’s social spending bill — cited rising inflation as a reason to pause on some parts of the White House’s agenda.
“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin said in a statement Wednesday. “From the grocery store to the gas pump, Americans know the inflation tax is real and D.C. can no longer ignore the economic pain Americans feel every day.” Manchin was making a cutting reference to earlier claims by the White House that rising prices were a transitory side effect of the economy’s emergence from the pandemic.
His comments signaled a concern that more government spending could exacerbate inflation, alarming some Democrats that he would pull back from supporting the $1.75 trillion social safety net and climate package that is currently pending in Congress.
The new flurry of reactions was prompted by a Bureau of Labor Statistics report Wednesday that prices in October rose 0.9 percent from September — and more than 6 percent over the past year, the largest annual rise in 30 years. In a written statement released soon after that report, Biden said “inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me.”
Senior White House officials were greatly disappointed by Wednesday’s report and surprised at how serious the inflationary problems are throughout the economy, according to people familiar with the matter. The report also fueled mounting concerns about supply chain bottlenecks.
For weeks, administration officials have been scrambling to try and alleviate the economic problems, frequently convening meetings across agencies and searching for solutions. But many administration officials have conceded they have few policy options to bring immediate relief to Americans, and the White House is concerned about ongoing political fallout, especially around the holiday season.
Republicans are ramping up their efforts to tie inflation to Biden’s spending policies, and they seized on Wednesday’s report.
“This will be the most expensive Thanksgiving in the history of the holiday,” tweeted Rep. Elise Stefanik (R-N.Y.). “The American people don’t deserve Biden’s #ThanksgivingTax!”
Such comments are part of a broader GOP effort to paint a picture of a Biden economy that is out of control, despite notable job growth and wage increases.
Most economists say there is a limited amount presidents can do to control inflation, especially when an economy is emerging from a drastic slowdown like the one imposed by the pandemic. But Biden, who likes to talk about the concerns of working-class Americans like his former neighbors in Scranton, Pa., is acutely aware of the political perils of pocketbook issues.
Biden’s trip to the Port of Baltimore was intended to provide a backdrop for his argument that the bipartisan infrastructure bill recently approved by Congress would ease transportation bottlenecks that are holding up goods and driving up their cost. “This bill is going to reduce the cost of goods to consumers, businesses and get people back to work,” Biden said.
The White House has been increasingly focused on trying to clear backlogs in the U.S. supply chain, with teams of administration officials looking for ways to expand the capacities of ports and waterways.
The inflationary headaches have proven a political and economic challenge for the White House since soon after it led passage of a $1.9 trillion covid relief package in March.
Treasury Secretary Janet Yellen and other White House officials initially said inflation would prove “transitory,” rejecting criticism from some economists that the relief plan would lead to an overheating of the economy. They have been largely consistent in sticking to their message that inflation would fade with time, but have been forced to adjust that argument as inflation has continued to dominate voters’ concerns throughout the year.
A Fox News poll in October found that 53 percent of registered voters were extremely concerned about inflation and higher prices, exceeding 11 other concerns including unemployment, the federal deficit and crime. More broadly, an NBC News poll in late October found 57 percent of Americans disapproved of Biden’s handling of the economy, while 40 percent approved.
White House officials remain optimistic the inflationary pressures will eventually subside. Jared Bernstein, a member of the White House Council on Economic Advisers, said in a speech earlier this week that the average forecast saw inflation eventually falling from 4-5 percent to 2-3 percent.
Like other economists and administration officials, Bernstein noted that many Americans spent less on services during the pandemic — when many establishments were closed, from restaurants to massage parlors — and shifted their spending to goods, driving up their prices. Eventually those spending patterns will return to normal, he added.
“The pandemic has opened up an historically large gap between demand for goods and services,” Bernstein said. “And that strong goods demand, partially due to fiscal relief, has interacted with covid to temporarily juice price growth.”
But it is not clear whether inflation will slow in time to prevent Democrats from suffering political damage in the 2022 midterm elections, where they already face a difficult landscape. Even if prices come down in coming months, political analysts say, many voters may retain an image of costs climbing during Biden’s administration.
Economists are divided on what the rise of inflation means for Biden’s broader economic agenda, which has been tied up for months in Congress. Since the president’s infrastructure bill recently won approval, the focus has been on the $1.75 trillion climate and family bill that Biden calls Build Back Better.
Larry Summers, the former treasury secretary who has been warning about rising inflation for months, said Wednesday’s report shows the problem is “becoming more entrenched.”
“It seems to me unlikely inflation will return to 2 percent target levels without strong monetary policy action or some kind of interference with economic growth,” he said in an interview.
Summers attributes the persistent inflation to Biden’s covid relief package, but said he supports the infrastructure and social spending bills. “Together, they are smaller over 10 years than this past year’s stimulus was over a single year, and in addition they are substantially paid for,” Summers said.
Mark Zandi, chief economist at Moody’s Analytics, disagreed, attributing the inflation rate to the impact of covid-19, particularly the delta variant, rather than the relief package.
“This surge in inflation we’re observing is a direct result of the pandemic. And if that diagnosis is correct, as the Delta wave wanes, inflation will moderate,” Zandi said. “I think we’re seeing the worst of the inflation right now.”
Zandi said the inflation is not transitory in the sense that it will disappear in the next month or the next quarter, but it will continue to wane in the coming months and “be gone by the next year.” For that reason, he argued current inflationary trends should not factor into the debate over Biden’s economic agenda.
“I don’t think we can take any lessons from high inflation now to what it means for the efficacy of passing that legislation,” he said of the Build Back Better framework. “They’re not connected.”
A senior administration official said the White House had always expected the recovery from the pandemic to be uneven, given the unprecedented nature of reopening an economy after it was so thoroughly shut down during the pandemic.
The official disputed any notion that the president’s economic agenda — either the recently passed bipartisan infrastructure deal or the pending Build Back Better legislation — would exacerbate the inflationary problems. Instead, the official argued Biden’s agenda would help alleviate the problem because both pieces of legislation are focused on increasing economic capacity.
The White House Council of Economic Advisers and Office of Management and Budget have published analyses arguing the Build Back Better legislation would actually lower prices for most American families by cutting the cost of prescription drugs, child care and housing.
“Going forward, it is important that Congress pass my Build Back Better plan, which is fully paid for and does not add to the debt, and will get more Americans working by reducing the cost of child care and elder care, and help directly lower costs for American families by providing more affordable health coverage and prescription drugs,” Biden said in a statement.
Others are skeptical. Ben Ritz, director of the Center for Funding America’s Future, a D.C. think tank, cited concerns that the Build Back Better agenda would add significantly to next years’s deficit because money for new programs would be spent before the taxes to pay for them could be collected.
That, in turn, could drive up prices further, Ritz suggested. “I don’t see how we can do that when inflation is two to three times our target,” he said.
Stein and Pager reported from Washington. Scott Clement contributed to this report.