Analysis: Inflation threatens Biden agenda, Democratic majority

0
61

Washington — inflation risk to stabilize the president Joe Bidenagenda, and Republicans say it will help them erode the Democratic majority in Congress,

John Ashbrook, co-founder of the public affairs firm Cavalry and a former aide to Senate Minority Leader Mitch, said, “Next year’s election will be a referendum on grocery prices and you can expect Republican challengers to vote between now and then.” Talk about something else.” McConnell, R-Q.

From egg cartons to used cars, prices are rising at a rate that consumers haven’t seen in decades, even as interest rates rise. Even though the broader picture is brighter — the economy is growing and jobs are adding — some Democrats worry that voters will pay more attention to the cost of a gallon of milk than macroeconomic trends.

However, instead of scaring them, the political uncertainty of the mixed-bag economy has added to the sense of urgency for most Democrats to pass Biden’s $1.75 trillion “Build Back Better” plan, which will fund efforts to tackle climate change. and will strengthen the economy of the country. social safety net.

The president’s party loses numbers in Congress in the midterm after its first election, and the Democrats have no seats left in the Senate and only a handful of seats in the House. Furthermore, Democratic strategists say it is better for the party if incumbents can show they helped deliver family-budget benefits, such as the expansion of the bill for the child tax credit.

Democratic pollster Anna Greenberg said, “Democrats shouldn’t do this because of an argument about the economy, but because when you have the power and the opportunity to make big policy changes… you do it.” ” “You have a narrative to tell and a story to tell when you’re running, and I think that’s more important than trying the game to see how it’s going to affect inflation.”

But the rubbish lies in the Senate, where Sen. Joe Manchin, DWA, has urged his colleagues to slow down consideration of the bill — which entails a $550 billion investment in green energy — at least partly about inflation. due to concerns.

“By all accounts, the threat posed by record inflation to the American people is not ‘temporary’ and is instead getting worse,” Manchin said. in a tweet, “From the grocery store to the gas pump, Americans know the inflation tax is real and that DC can no longer ignore the economic pain Americans feel every day.”

The phrase “inflation tax” is often used by Republicans to describe the pain of rising costs, and Manchin’s adoption of it is widely seen as ominous for Democrats on the prospects of implementing the measure on an accelerated timetable. was received.

“As if [inflation] Build Back Affects Better, obviously the answer is how it affects Joe Manchin,” said Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee.

Democrats can’t be sure what a basket of household goods will cost a year from now — the Labor Department’s last measure of the Consumer Price Index in October saw a 6.2 percent year-over-year increase — making it difficult Lets get an idea of ​​how much of a factor this will be in the medium term. That helps explain why it didn’t make the White House rethink its legislative agenda.

Over time the Biden administration has changed its message on inflation. At first, White House officials ignored this. Then, he dismissed it as “temporary.” And now they say that passing the Build Back Better bill will reverse it. So are his colleagues in academia and Congress.

“I have no doubt that he is going to improve the build back, and it is going to help with inflationary pressures,” Representative Ro Khanna, D-Calif., a Progressive Leader in the House and a Biden aide, told MSNBC. On the Stephanie of Kaha Ruhle reported on Friday.

The basic economics is easy to understand: Prices are rising because demand outstrips supply. Congress and successive presidents – Biden and Trump – have borrowed several trillions of dollars and put much of it in the hands of consumers to offset the economic effects of the pandemic. At the same time, the country is experiencing shortfalls and delays in the delivery of goods, many of which are related to global supply-chain disruptions.

From there, both economics and politics are complicated, and potential solutions may be more harmful than helpful. The easiest counter-measure for the Federal Reserve would be to raise interest rates, but this would discourage borrowing and could slow the economy. In other words, it could be that rising interest rates are worse than inflation for most Americans.

But far more voters spend time looking at home goods prices than parsing the Labor Department’s report, which means sticker shock could affect macroeconomic trends.

“Politics are very different from substance,” said Aaron Klein, a former Treasury Department official and senior fellow in economics at the Brookings Institution, a left-wing Washington think tank. “If people become worried that their money is worthless, their outlook on the economy turns sour,” which can anger the ruling party.

From a policy standpoint, he said, ongoing actions in Congress are less consequential than actions of the Federal Reserve Board, which can raise or lower interest rates to alter the attractiveness of borrowing and indirectly affect prices. .

“How this economy deals with the threat of inflation will be determined by who Biden elects to the Fed, more than whether Congress passes Build Back Better,” he said.

Yarmuth said he believes economist Joe Biden’s proposal will not add to inflationary pressures and that the price of gas – a quick measure of cost for many consumers – will settle before the mid-term.

But, he said, a recent trip to Costco demonstrated the extent to which groceries and other items are becoming more expensive for families.

“I was amazed at how much the price of the things I bought had gone up,” he said. “Obviously, if things continue to get worse in the inflation picture, it will be bad.”