Inflation poses new challenges for progressives
The sharp increase in inflation could pose a challenge for progressives as they push to enact a robust social spending and climate package.The Labor Department reported Wednesday that the Consumer Price Index (CPI) increased by 6.2 percent in the 12-month period ending in October, the biggest increase since 1990. The data quickly caught the attention of Sen. Joe Manchin (D-W.Va.), who has already raised concerns about the size and the timing of the spending bill. Republicans are also highlighting the data in an effort to pressure moderate Democrats to oppose the legislation.
The inflation narrative is largely set. The coronavirus pandemic created supply chain snarls. It put production out of whack. As demand has roared back following Covid-19 lockdowns, prices have soared. © Mario Tama/Getty Images A person shops in the meat section of a grocery store on November 11, 2021 in Los Angeles, California.
But there's a big problem with that narrative: It may not be the whole story.
As The Wall Street Journal reported last week, corporate America is helping fuel the inflation madness in order to make more money.
"Executives are seizing a once in a generation opportunity to raise prices to match and in some cases outpace their own higher expenses, after decades of grinding down costs and prices," write Kristin Broughton and Theo Francis.
Sunday shows preview: Biden administration confronts inflation spike
The Biden administration's response to inflation hitting a 30-year high is expected to dominate this week's Sunday talk shows.The Department of Labor released data on Wednesday showing that the consumer price index, which tracks inflation for a range of goods and services, rose 6.2 percent in the 12 months leading into October, marking the highest annual inflation rate reported since November 1990.The data comes as President Biden faces pressure to combat rising prices in food and gas - both of which have driven the inflation spike - and as he has pushed Democrats to pass a $1.75 trillion social spending package.
Most of the largest US companies are making more than enough money to account for inflation, they write, citing profit margins at many large US companies that are well above 2019 levels.
Companies complain of not being able to find workers and having to deal with the supply chain problem -- but if they are also building bigger profits behind inflation, that's enough to aggravate even the biggest supporter of free markets.
The Washington Post reported this weekend that the White House is considering turning a more circumspect eye toward corporate America, perhaps to deflect the political heat President Joe Biden has taken for the economy's performance.
"Republicans have blamed the inflation problems on Biden's economic agenda, but there are signs that the White House could soon push back more forcefully, saying that large corporations are partly to blame for the dramatic increase in costs," writes Jeff Stein for the Post.
White House sees solving pandemic, supply chain issues as key to ending inflation spike
Treasury Secretary Janet Yellen said Sunday, 'the cause of this inflation is the pandemic.' She predicted prices could return to normal in 2022.“There's no doubt inflation is high right now. It's affecting Americans’ pocketbooks. It's affecting their outlook," National Economic Advisor Brian Deese said during a Sunday NBC News interview.
He suggests this is an idea under consideration, but there are already some indications Biden will take a tougher view. Last week, he called on the Federal Trade Commission to investigate the oil and gas industry for price gouging as the cost of fuel shoots up.
The industry's lobbying group called it a distraction and said Biden should be encouraging more domestic oil and gas production.
The Biden administration earlier this year said the consolidation of the industry into a few main players, along with pressure from the pandemic, made pork prices shoot up. They have not fallen. The administration is looking to apply antitrust laws. The pork industry is frustrated by a new animal welfare law in California and says those costs are being passed to consumers.
There are complicating factors for every industry.
It's weather in Brazil behind inflation in coffee prices.
It's the chip shortage influencing auto prices.
An Obama Economic Adviser on Biden’s Big Inflation Problem
“I’ve long thought Washington was doing too little, but it has now overcorrected and done too much,” says Harvard’s Jason Furman.But while there are many supply-side factors driving inflation, from supply-chain issues to a unprecedented labor shortages, there is also red-hot demand from consumers for goods and services, meaningfully stoked by the $1.9 trillion stimulus package Biden passed in March, according to Harvard economist Jason Furman, who served as one of Barack Obama’s top economic advisers. In January, Furman wrote an op-ed in the The Wall Street Journal arguing that the stimulus package should be contingent on the pace of the country’s economic recovery.
It's OPEC behind gas prices.
Inflation is temporary. But temporary is a relative term. Mark Zandi, chief economist of Moody's Analytics, recently wrote in a CNN piece that all the price increases have added nearly $200 per month in living expenses for a household making the median income.
He guessed inflation won't go away today or tomorrow, but that it will slow relatively soon.
"A year from now, as the pandemic recedes, inflation will be low enough that we won't be talking about it," according to Zandi. "The hair-on-fire discourse over high inflation is understandable, but it's overdone."
A year can be an eternity. But let's say inflation is in the news for another year. That gets us through a congressional election in which Republicans are already at a historic advantage.
The Democratic economist Larry Summers, who has been something of an inflation hawk, warns in The Washington Post that inflation, specifically, could lead to a second Donald Trump presidency.
"Excessive inflation and a sense that it was not being controlled helped elect Richard Nixon and Ronald Reagan, and risks bringing Donald Trump back to power," Summers wrote in a November 15 column for the Post. "While an overheating economy is a relatively good problem to have compared to a pandemic or a financial crisis, it will metastasize and threaten prosperity and public trust unless clearly acknowledged and addressed."
Thanksgiving shows how Biden has effectively lowered the minimum wage
When Joe Biden ran for president last year, he talked about establishing a $15 hourly minimum wage. © Provided by Washington Examiner President Joe Biden hasn’t made that happen. Most of the incumbent senators don’t support it. Then Biden dropped the issue. He hasn’t made a push to raise the federal minimum wage, which has been stuck at $7.25 an hour since 2009. That’s the case even though several Republican senators support a smaller increase or indexing wages to inflation, such as Mitt Romney of Utah, Tom Cotton of Arkansas, Lindsey Graham of South Carolina, Susan Collins of Maine, and others.
As inflation mounts, Biden stays with Powell at the Fed. What then should we make of Biden's decision to renominate Jerome Powell to serve as the chairman of the Federal Reserve? Powell has been much more in the "inflation-is-temporary-let's-not-overreact" camp.
He will see opposition on both sides of the aisle as a Senate confirmation vote approaches. Originally nominated by Trump, Powell ultimately found himself the subject of the then-President's attacks for not lowering interest rates enough to his liking.
While Powell has repeatedly acknowledged the problem of income inequality and urged the government to address it, he has angered liberals for not being strong enough on Wall Street regulations.
Powell is a "dangerous man to head up the Fed," according to Democratic Sen. Elizabeth Warren of Massachusetts, who said in September she would oppose a second term for Powell. She views him as an anti-regulation Republican.
CNN's Paul R. La Monica writes that Biden's pick shows he "learned a valuable lesson from his former boss (Barack Obama) about continuity over partisan politics during challenging economic times."
Biden nodded to progressives by nominating Lael Brainard to be the Fed's vice chair, but keeping Powell shows he's tuned in to economic stability as the top issue of his presidency.
Biden's spending binge makes Americans poorer, just before the holidays
Families are struggling — Biden and his allies in Congress need to stop their destructive spending now.I say working families are high-class people - and we know how to do the math. Our budgets show us that the money we earn, even from all the extra hours we're working because of the government-funded labor shortage, isn't buying as much.
"If inflation is a political liability for Biden, then that favors continuity at the Fed," Ed Campbell, a portfolio manager and managing director at PGIM Quantitative Solutions, told La Monica.
What can the Fed do to fight inflation? Raise short-term rates. CNN's Chris Isidore writes that the Fed slashed rates during the pandemic and bought assets to put more cash into the economy, which helped keep markets from plunging.
But the moves also may have driven inflation.
"Powell critics argue that helped fuel the largest rise in consumer prices in 30 years and heavily inflated the value of assets like stocks and home prices — both of which have hit record levels this year," writes Isidore.
Acting on gas prices. Biden hopes to announce a decision Tuesday to release oil from the nation's Strategic Petroleum Reserve, according to CNN's reporting. It could have a limited effect on controlling gas prices but is among the direct actions Biden can take against inflation.
It's not clear if he'll go the extra step of banning US oil exports, as some Democrats have urged.
There's one anti-inflation tool Biden hasn't used. There aren't too many things Biden can do about inflation. He's used executive action to help ease supply chain issues at ports and asked for accountability from the oil and gas industry. But he doesn't control the Federal Reserve, so he can't just raise interest rates.
There is one thing he could do, but hasn't, writes CNN's John Harwood, and that's end tariffs placed by Trump on Chinese imports.
Why not simply do it? Politics.
"The reason to do this or not to do this should not be inflation," Richard Haass, a top State Department aide under President George W. Bush who now heads the Council on Foreign Relations, told Harwood. "The impact on US-China relations, and the domestic politics of US-China relations, would be larger than any impact on inflation."
The tariffs have cost American consumers and failed to revive American manufacturing. But even though they've failed as an economic measure, reinstating them might cost Biden too much politically, writes Harwood.
Ending tariffs without getting something in return would only encourage Republican accusations that the President has been soft on China.
Republicans are likely to accuse Biden of many things, however. One major thing they accuse him of these days is driving inflation.
Inflation is back: will you win or lose? .
© William SALIGOT / Ouest-France Gasoline has increased 22% in one year. We had not seen this decade. Prices increased 2.8% in one year. Hence the inflation compensation of € 100 paid in December 2021. Not sure it is enough to ease concerns. This is a new economic data inflation is back after ten years of evolution measured price, interspersed with a peak in 2018. What consequences? Here are some answers.