The Biden Administration is getting coal for Christmas, at least when it comes to the economy.
New economic hits keep coming, so it won’t be the merriest of Christmases at the White House.
A day before Christmas Eve, theBureau of Economic Analysis said a key measure of inflation rose by 5.7% for the 12 months ended in November. That’s the fastest increase in prices since July of 1982, when the American economy was still recovering from Carter-era inflation.
Also, a new poll fromMorning Consult/Politico shows Americans are seriously unhappy with the way President Biden is handling the economy.
And then there’s Sen. Joe Manchin’s entrenched opposition to Biden’s “Build Back Better” spending bill.
Politically, it’s all bad news. The irony is that while Biden may not be to blame, he’s certainly getting blamed.
The Personal Consumption Expenditures Price Index tracks the change in prices of goods and services purchased by consumers in the U.S. This index covers the broadest set of goods and services in calculating inflation. The Federal Reserve uses the index as its preferred measure of inflation to determine its policy decisions.
Despite PCE inflation having reached its highest annualized level since 1982, it’s likely even worse than what the current rate indicates because months of low inflation at the end of 2020 and beginning of 2021 are included in the calculation.
Most economists now agree that inflation won’t peak for a while. Even Federal Reserve Chairman Jerome Powell now predicts that inflation won’t be tamed until late next year.
The timing could not be worse for Democrats as the midterm elections are little more than 10 months away.
How Bad Is This Politically?
Economic issues are, by far, at the top of the list when it comes to what voters are thinking about when they go to the ballot box. In fact, voters cite the economy three times more often than security issues, the next most important factor.
TheMorning Consult/Politico survey indicates that Biden is deep underwater when it comes to voters’ perceptions of how he is handling the economy. Only 17% “strongly approve” of his economic performance, while 40% “strongly disapprove.” Another 13% “somewhat disapprove.”
These numbers are comparable to aCNBC All-America Economic Survey from early December that showed only 37% of Americans approved of Biden’s handling of the economy.
And, as I write this column on Christmas Eve, only 43% of Americans approve of Biden’s general job performance, while 53% disapprove, according to theReal Clear Politics average of polls (it includes nine surveys that polled different groups respectively, including likely voters, registered voters, and adults).
Biden’s job approval is among thelowest at this stage in a presidency. His numbers are only slightly better than former President Trump’s (41%) at the 2018 midterms, and worse than former President Obama’s (45%) at the 2010 midterms, when, in Obama’s own words, Democrats were humbled by an electoral “shellacking.”
The party of the incumbent usually takes a beating in the midterm elections. The weaker the incumbent is politically, the bigger the beating his party usually suffers.
Build Back Better and Manchin
Sen. Joe Manchin seems to have put a final nail in the coffin of Biden’s multi-trillion dollar “Build Back Better” spending bill. Without the vote of the West Virginia Democrat, the bill will not pass the Senate.
One of Manchin’s main objections is that BBB would further fuel inflation. The Biden administration claims the opposite. Both are playing “lies, damn, lies, and statistics” games, citing different prediction models.
As I wrote in an earliercolumn, if BBB was intended to lower inflation, why didn’t the White House make that argument months ago? It’s also hard to believe that a huge spending bill will lower inflation, because prices rise when money floods the economy, raising demand for goods and services. On the other hand, even if it were to pass, it will take time before it affects inflation.
In any case, the monthslong, failed struggle to pass BBB is a worsening black eye for Biden and Democrats.
Is Biden to Blame?
Inflation is higher in almost all of the world’s largest economies, but it’s especially bad in the U.S. According to aPew Research survey of the 38 OECD countries (and eight other significant non-member countries for which the OECD provides data), the U.S. had the third-highest increase in inflation, behind only Brazil and Turkey.
Biden has had little control over many of the causes of the current inflationary cycle, mainly the supply-chain bottlenecks created by the pandemic. But he could have moved more quickly to partially alleviate the problem.
Republicans are also trashing Biden for the rise in prices at the pump, something U.S. presidents have limited influence over, especially in a hot economy that fuels demand for energy. Still, Biden’s rhetoric against oil and gas drilling, including fracking, doesn’t help. Nor does the message sent by shutting down the Keystone XL pipeline, even if canceling construction had no effect whatsoever on existing supply.
However, Biden could have taken stronger action to prevent labor shortages and control the money supply. His $1.9 trillion “American Rescue Plan” could have been better calibrated both in how much money it fed into the economy and the disincentive to work it provided to some Americans.
What I certainly blame Biden for is political doublespeak.
Inflation is always transitory, fluctuating over time. That’s true in countries where inflation has traditionally been under control, like the U.S., or in countries where it’s been out of control for years, like Venezuela.
What’s disingenuous is to use “transitory” as a synonym for “short-term,” which is how the Biden and his top officials tried to sell it.
In fact, Secretary of the Treasury Janet Yellen and Secretary of Transportation Pete Buttigieg were among the White House officials deployed to tell us that inflation was already going down in the early fall. It was not. They must not go to gas stations or supermarkets.
To conclude, what’s most important politically isn’t whether Biden and Democrats are to blame for the economic dissatisfaction, but whether they are being blamed for it.
The answer to the latter is a resounding yes, despite a sharp recovery in the unemployment rate and strong economic growth.
I still hope they have a happy Christmas at 1600 Pennsylvania Avenue.
And merry Christmas to all of you!
Cover photo: Customers shop for produce at a supermarket on June 10, 2021 in Chicago. Inflation had already risen by 5% in the 12-month period ending in May, the biggest jump since August 2008, and inflation has worsened since then. (Scott Olson/Getty Images)
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