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Is it too late for Biden to reverse course?
The Department of Labor delivered the news today that consumer prices rose 6.1 percent in October, the fastest annual rate in over three decades. The Labor Department's press release said that inflation was "broad-based," meaning we're no longer facing the narrow inflation that led Biden administration and Fed officials this summer to suspect it could be transitory. Inflation is everywhere, it is accelerating, and it is sticking with us.
The Biden administration's agenda was not built for this. Build Back Better was crafted for a strengthening economy whose main issue would be the distribution of the benefits of growth. The folks who shaped it were convinced that the early Obama administration made a terrible mistake by not going big enough with the 2009 stimulus, which they think contributed to the sluggish recovery that helped Republicans win a majority in the House in 2010 and the Senate in 2014.
The trouble is that the economic crisis of our day is nothing like what the country faced when Obama took office. Back then, the country faced a critical lack of demand, misallocated investments, a tottering financial system, and capital losses in real estate and real estate-linked financial products. Our economic problems now are on the supply side: shortages of goods and labor, supply-chain disruptions, jammed ports, and skyrocketing energy prices.
On Wednesday, the Biden administration attempted to pivot by claiming that they'll now be able to fight inflation with the same policies meant to stimulate demand, redistribute wealth, and shift investment toward projects consistent with the left's climate change and social justice agenda. While it is true that some of the infrastructure spending could alleviate inflationary pressures years from now, in the short term they are likely to exacerbate the supply problems while further ramping up demand.
Other Biden policies also threaten to make inflation worse. The vaccine requirements could prompt a non-trivial share of Americans to retreat from the workforce. One recent poll showed that one-third of unvaccinated workers would rather quit than acquiesce to the mandate. And pledges to reduce carbon emissions are unlikely to encourage investment in fossil fuel at home or production abroad. Who's going to build up a fleet of freight-hauling trucks that might be declared environmental hazards a few years down the road?
It's not too late. Biden could concede that high inflation requires new policy priorities. But so long as so many in his administration continue to regard inflation as some sort of GOP talking point instead of a reality hurting millions of Americans, that's unlikely.
– Alex Marlow & John Carney
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