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Tuesday, June 28, 2022

The Memo: Inflation delivers gut-punch as Biden tries to sell economic record

The White House is seeking credit for the better parts of the economy this week — but President BidenJoe BidenPhotos of the Week: Former Sen. Dole lies in state, Capitol sunset and Instagrinch Overnight Health Care — Presented by AstraZeneca and Friends of Cancer Research — Court leaves Texas abortion ban, allows suits Overnight Energy & Environment — Presented by ExxonMobil — Biden orders end to overseas coal finance MORE’s efforts to write a more positive script have been stymied by inflation.

Inflation for November came in at 6.8 percent year-on-year in data released Friday, surpassing October’s read of 6.2 percent. Both of those figures were, at the time of their release, the highest inflation numbers in a generation. 

However, the White House argues that the dominant media narrative, focused on economic malaise, is too pessimistic.

Biden’s aides would much prefer to focus on the robust job growth the nation has enjoyed during the president’s first 11 months in office. 

Unemployment for November stood at just 4.2 percent — down from a pandemic high of 14.8 percent in April 2020 and 6.3 percent in January of this year. There were fewer new jobless claims in the most recent weekly data than at any time since 1969.

National Economic Council director Brian DeeseBrian DeeseGraham hopes to sway Manchin against Biden plan with new CBO report Economists call on Congress to ‘swiftly’ pass sweeping climate and social policy bill Biden says ‘consumer spending has recovered’ to pre-pandemic levels MORE and White House chief of staff Ron KlainRon KlainDo the media really treat Biden worse than Trump? White House points finger at the press White House seeks to get some credit if gas prices fall MORE have led the effort to cast the administration’s economic record in a more positive light.  

Deese joined White House press secretary Jen PsakiJen PsakiWhite House on Smollett verdict: Lying about a hate crime is ‘shameful’ Biden says he will speak with Manchin next week The Hill’s 12:30 Report – Presented by Facebook – Supreme Court allows lawsuits against Texas abortion ban MORE for a briefing Thursday with a raft of charts aimed at showing the strength of the economic recovery — and to suggest that gas prices, a persistent sore point in recent months, have begun to come down.

Klain, in a video released on Twitter the same day, pointed out Biden had created more jobs during his first year than any president in history — some six million. 

Klain also noted that the number of Americans on the unemployment roll was a fraction of what it had been, at just over two million compared to 21 million.  

Highlighting other factors including increasing retail sales, the chief of staff claimed to see “an economy that’s humming.” 

In some ways, though, it is humming at too high a pitch. One factor causing the spike in inflation is a clog in the supply chain. The primary cause of that problem is Americans buying an enormous number of goods while spending on services such as entertainment and dining has remained muted. 

The tight job market has given workers much greater leverage than before — a welcome change for many people after years of de facto wage stagnation. But pay raises can serve as fuel piled on the inflationary fire.

Politically speaking, one key problem for Biden is that high inflation affects Americans directly and across the board. A strong job market is only a boon to someone looking for a new job. A rising stock market only lifts the fortunes of people invested in it. But rising prices hit everyone, and in a very immediate way.

Biden, who prizes his own middle-class roots and capacity for empathy, acknowledged the visceral impact of the fast-rising prices in Friday afternoon remarks at the White House.

“It’s s real bump in the road. It does affect families,” the president said. “When you walk into the grocery store and you’re paying more for whatever you’re purchasing, it matters.” 

The headwinds Biden faces are exacerbated by the fact that millions of Americans are experiencing problematic inflation for the first time in their lives. 

The last time inflation was close to its current level, the late President George H.W Bush was in office. Before that, the modern commander-in-chief most synonymous with inflation was President Carter in the late 1970s.

Inauspiciously for Biden, both Bush and Carter lost their bids for reelection.

Biden’s position is not nearly as dire — yet. 

Federal Reserve Chairman Jerome PowellJerome PowellHow long until Democrats throw Jerome Powell under the bus? Annual inflation rises to 6.8 percent, the highest rate since 1982 The Memo: Dour public mood spells trouble for Biden MORE recently told Congress that it was time to retire the word “transitory” to describe inflation. But there are still hopes at the Fed and at the White House that inflation will ease by the spring as the supply chain bottlenecks loosen. 

Still, even the current situation threatens to significantly complicate Biden’s legislative agenda,  in particular the unresolved battle to pass his massive Build Back Better plan.

Republicans have cast the idea of a $1.9 trillion bill in the current climate as profligate, and likely to stoke inflation anew. 

The White House, including Biden himself, has been seeking to rebut that argument, asserting that the plan’s investments in physical and human infrastructure will actually ease inflationary pressures in the longer term by boosting economic capacity.

“I think if you look at what most people, most of the economists are saying, this Build Back Better bill is not going to increase inflation,” Biden said Friday. “It will diminish inflation. It has a negative impact on inflation. It doesn’t raise inflation, but that’s hard for people to think about right now.” 

He got the last part right, at least. 

While inflation remains so high, it drowns out the story the White House would prefer to tell. 

The Memo is a reported column by Niall Stanage.

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