WaPo (“Biden seeks political boost from slowing inflation“):
President Biden on Tuesday sought to capitalize on positive economic news that inflation numbers are cooling, arguing that his policies are helping stabilize an economy battered by a global pandemic and a war in Ukraine, after months of facing political derision for rising prices.
“Inflation is coming down in America,” Biden said, declaring it a reason for optimism ahead of the holiday season and the year ahead.
His remarks came after more than a year of Republicans charging that Biden’s free-spending policies helped generate the conditions for near-record-high inflation, and that he then downplayed the effect on Americans by calling the problem “transitory.”
Rising gas prices and food costs, combined with warnings of a recession on the horizon, created a noxious political picture for Democrats ahead of the midterm elections. But the party emerged stronger than expected, and Biden is now seeking to reframe the economic narrative ahead of announcing his own reelection plans early next year.
“Look, I know it’s been a rough few years for hard-working Americans and for small business as well — and for a lot of folks things are still pretty rough,” he said in remarks from the Roosevelt Room at the White House, flanked by top economic advisers. “But there are bright spots all across America. We’re beginning to see the impact of our economic strategy. And we’re just getting started.”
Biden seized on new metrics as he began shaping what could be a message for his 2024 campaign if he runs, as expected, or for his legacy if he steps aside.
Biden spoke a little over an hour after new figures were released by the Bureau of Labor Statistics showing that prices in November rose 7.1 percent compared with 2021, the smallest year-over-year increase in many months. A number of other figures — including “core inflation,” which removes volatile categories such as food and energy prices — also showed smaller increases.
There is still cause for concern. The figures often ebb and flow, and economists prefer to see several months’ worth of numbers before drawing conclusions. Biden, perhaps aware of a potential backlash if he appears to be celebrating prematurely, stressed that he was not declaring mission accomplished.
“As we make the transition to a more stable growth, we could see setbacks along the way as well,” he said. “We shouldn’t take anything for granted.” He added that there is “a lot more work to do.”
Republicans were quick to note that even if prices are rising more slowly, they are still high by historical standards.
The whole thing is rather silly but it’s a game we’ve been playing as long as I can remember—which is quite a long time now: Presidents taking credit for good economic news while insisting the bad economic news isn’t their fault. In most cases, their impact is minimal.
Gas prices are way down, no thanks to Biden. But, then, they went up for reasons mostly not having to do with Biden. (He banned the import of Russian oil, liquefied natural gas, and coal to the United States in response to their illegal invasion of Ukraine, which contributed at the margins. I supported the move.) And, of course, they’re considerably higher now than when he took office. So, it’s hard to give him credit here.
His “free-spending policies” likely contributed to inflation but, again, only at the margins. But prices are up globally as the economy settles down into a new normal after the COVID pandemic shakeup.
Nor is it clear exactly what policies he has enacted that are supposed to have helped bring prices down. The Fed is seemingly trying to force us into recession with massive hikes in interest rates that have already crashed the housing market. But that’s out of his hands.
In Biden’s first two years, he steered several major bills through Congress, starting with a $1.9 trillion economic rescue package and a $1.2 trillion bipartisan infrastructure law. Congress in August also approved a $280 billion measure to expand veterans health care and a $280 billion law to counter China’s economic rise.
One of his signature pieces of legislation this year was labeled the Inflation Reduction Act, even though it had more to do with funding efforts to combat climate change, raising taxes on large corporations and lowering health-care costs.
Conservatives argued that all this spending was paving the way for runaway inflation, even as Biden said it was crucial to provide relief to suffering Americans. And some prominent Democrats, including former treasury secretary Larry Summers, agreed with the conservatives.
On Tuesday, Summers applauded the latest numbers, saying, “The figures are encouraging.” He said he still believes that inflation has its roots in the overstimulation of the economy during 2021, when the Biden administration injected large amounts of spending.
But Biden’s decision to release more oil from the Strategic Petroleum Reserve has helped reduce gas prices, Summers said, and some of the coming investments in semiconductors and infrastructure could spur further economic growth. He also attributed the improving economic outlook to moves by the Federal Reserve to combat inflation, and to the White House policy of not meddling in those decisions.
“These data are encouraging, even as the president recognizes we have a long way to go,” Summers said. “But for the administration’s support for the independence of the Fed as it adjusted policies — and the aggressive use of the Strategic Petroleum Reserve — we could well have been in a much more difficult place today.”
Again, this all presumes much more of a government role in the economy than actually exists in a country with a $23 trillion GDP. It’s easier for a President to screw things up than to fix them.
I like some of Biden’s moves vis-a-vis China from a national security standpoint, regardless of their economic impact. But, as Dan Drezner notes, he’s also repeating many of the ill-considered mistakes of his predecessor. Indeed, “the primary difference between the Trump administration’s foreign economic policy and the Biden administration’s foreign economic policy is that the Biden team is way better at implementing protectionist policies.”
It’s one thing if the Biden team wants to rationalize a strategic decoupling from China: I get that. I even kinda sorta get the principle of defending the national security exemption in Article XXI. Applied properly and judiciously, it’s important that there be such an exception.
Defending the steel and aluminum tariffs, which represented Trump’s crudest, dumbest attempt at issue linkage, is something altogether different. I believe the young people today — the ones most hurt by the higher consumer prices created by this kind of dumb protectionism — would call it “extra.” The claim of a national security threat was always ginned up, particularly since the 2018 action had no effect on imports of Chinese goods — they were already facing steep tariffs.
The Biden administration simultaneously wants to claim that “America is back” from the bad old days of the Trump administration while implementing an awful lot of trade restrictions that target U.S. allies. The inherent tension between these two aims is not going to go away — which means that, from time to time, I will have to remind readers about the logical hole at the center of Biden’s grand strategy. Or as Brad DeLong recently explained to the Financial Times, “The U.S. is now an anti-globalization outlier.’“
He’s doing this for the same reason Trump did: it appeals to certain elements of the voter base. But, while they give the appearance of “being tough” and “doing something” about American jobs being lost to cheap foreign goods, it’s certainly inflationary.
