The upcoming elections in ten months could be the most important since 1862, what with an opposition party increasingly in thrall to authoritarianism and election subversion. The Republicans must be opposed, which means the Democrats must be supported. That said, the Democrats – particularly President Biden – can make this easier by governing well. Granted, that isn’t easy with the opposition determined to blow up any and all legislation on the proverbial tarmac. On one matter, however, Biden has at least some room to maneuver: inflation. Unfortunately, he’s going in the wrong direction and needs a course correction.
As the editors of the WaPo [1] noted yesterday, Biden has settled upon a … novel explanation for the recent bout of inflation: monopolies. The editors were understandably unimpressed.
President Biden is facing mounting criticism for inflation’s rise to its highest level since 1982. Unfortunately, the White House’s latest response is to blame greedy businesses [2].
Economists across the political spectrum are rightly calling out the White House [3] for this foolishness. Even some within the White House are questioning this approach, The Post reports [4].
Now, this is not to say, as Republicans are doing, that inflation is Biden’s fault. A combination of COVID recovery demand and COVID supply hiccups have led to a classic economic overheat. The Administration, like most of the rest of us, expected things to sort themselves out as COVID faded. COVID … is not fading, but neither is the recovery. So here we are.
As the WaPo editors note, there is something Biden can actually do.
The reality is that the best tool the nation has to fight inflation is the Federal Reserve raising interest rates. But the Fed operates independently from the White House. What Mr. Biden could do to help the Fed is finally announce his nominees [5]for the three seats on the Federal Reserve’s Board of Governors.
On Friday, Mr. Biden did bring up the Fed’s role in tackling inflation: “I’m confident the Federal Reserve will act to achieve their dual goals of full employment and stable prices, and make sure the price increases do not become entrenched over the long term,” he said.
The next-best strategy Mr. Biden could adopt is to remind Americans that the pandemic is causing unusual strain on all of us and that the best remedy is to get people vaccinated and tested to get the virus under control. If the pandemic subsides, many of the supply chain and labor shortage issues should, too.
I would add one more shift to the message: pushing the Fed to act. Normally, Biden would only have rhetoric as an option, which many might see it as a threat to the Fed’s vital independence. However, Biden also has those three vacancies on the Board of Governors. Thus, he could also speak with his actions.
Handing those three Fed seats to inflation hawks would make the point far louder and far clearer than any spoken words. It could even give him a place in history as the man who rid the Fed of its history [6] of the slows [7] when it comes to normalizing interest rates.
More to the point, it would bring Biden’s messaging on inflation closer to the reality on the ground.
As important as antitrust is, it’s not a blow against inflation. Only the Fed can do that. Biden has an opportunity to make sure of it. In the process, he can also help slay inflation and improve the political prospects of the pro-democracy coalition this November.
That’s a win-win if there ever was one.