The White House has struggled to hit on an effective price message or policy, causing Democrats anguish.
As Ronald Reagan might have put it: Here we go again. Forty-two years after inflation helped sweep the former California governor into the White House and return the Senate to GOP control, surging prices threaten once again to upend a Democratic administration.
President Joe Biden and his fellow Democrats in Congress are desperate to avoid the fate of President Jimmy Carter, ousted after one term. But Biden so far has had little success in either figuring out how to douse inflation that’s running at a four-decade high or even convincing voters that it wasn’t his $1,400 stimulus check that acted as kindling.
Inside the administration, there’s a sense of frustration, doom, and some say magical thinking about inflation, but no clear path on the best way for the White House to grapple with an economic phenomenon that’s been more severe and lasted longer than officials expected. Unfortunately for Biden and Democrats, the lesson from the 1970s and ’80s is that US presidents are quite limited in what they can do on their own to tamp down price pressures.
In the approach to November’s midterm elections, Ron Klain, Biden’s chief of staff, has argued that the president and his allies should talk more about the president’s accomplishments, especially the remarkable rebound in employment, along with laws he signed to provide families with pandemic relief and rebuild US infrastructure. Klain also advocates that Biden contrast his policies with Republican proposals on taxes and the deficit.
Biden appeared to be acting on those recommendations last week, delivering remarks at the White House that were sharply critical of a proposal by a top Republican senator, Rick Scott of Florida, to require all Americans, even those with the lowest earnings, to pay some income tax. Biden will talk about his plans to fight inflation again on Tuesday, when he’s expected to escalate his criticism of Republicans and call out what he sees as their lack of proposals.
People close to the president are optimistic that prices will start to moderate by the summer, which is when many voters will begin engaging with campaigns. The idea is that independent and swing voters, women, and progressives will feel good enough about the economy to turn out for Democrats again. Such expectations, though, are out of sync with those of Wall Street economists. Goldman Sachs Group Inc., for instance, projects annual inflation will still be hovering at around 7% on Election Day.
At times, Treasury Secretary Janet Yellen and her team have disapproved of the way top White House aides have downplayed the risks from inflation and dismissed it as short-term when, in fact, it has lasted for months. Last fall into the early winter, in particular, Yellen and key members of her staff tried to distance themselves from this message, unwilling to stake their reputations as economists and policy experts on a political framing they found overly optimistic, according to three sources familiar with the back-and-forth.
“We all recognize that inflation is a macroeconomic concern and are working around the clock to come up with policy remedies to provide relief to the American people,” said Ben Harris, the assistant secretary for economic policy at the Treasury Department, in a statement. “While we face additional price pressures like Russia’s war in Ukraine, the US economy is on strong footing and we expect inflation to abate over the next year.”
One senior White House official says the president is committed to doing everything he can to lower prices. Already the administration has taken steps to relieve congestion at US ports, released crude oil from the government’s stockpile, and backed legislation that incentivizes makers of semiconductors to build new plants stateside. It’s also looking into using antitrust policy and other tools to fight alleged price gouging by meat processors and other industries.
Yet the supply-side measures the administration has enacted have failed to make a big impact so far. Despite a record drawdown from the Strategic Petroleum Reserve, gasoline prices are now approaching $6 a gallon in California. Shipping delays and labor shortages continue to jam supply chains. And while the war in Ukraine isn’t helping matters, Biden’s repeated attempts to blame Russian President Vladimir Putin for price increases don’t ring true when inflation had been ticking up for months before the invasion.
The No. 2 Democrat in the Senate, Dick Durbin of Illinois, is leaning on the White House to seek out new means to tame inflation. Biden is “doing a lot, but I want him to do more,” Durbin says. He didn’t elaborate on what other policies he’d like to see from the White House.
It’s not hard to understand why Democrats in Congress may be starting to panic. A recent CBS News/YouGov poll found that more than 9 out of 10 Americans are concerned about the pace of price increases, and 69% disapprove of Biden’s handling of inflation.
It’s a sea change from last summer, when voters told pollsters their top concerns were Covid-19, the chaotic US withdrawal from Afghanistan, and the health of the economy. “The inflation conversation came out of nowhere, and now it dominates every conversation with swing voters,” says Lanae Erickson, a senior vice president at Third Way, a center-left think tank and advocacy group. “When inflation is this high, whoever is in charge gets blamed.”
The political landscape may yet shift between now and November, bumping inflation lower down the list of voter priorities. Should the Supreme Court strike down the landmark Roe v. Wade decision that guarantees abortion rights nationwide, as expected, Democrats are poised to exploit an issue that resonates deeply with many of their voters.
Perhaps the biggest problem for Democrats is that there’s little Biden—or any president—can do about inflation. “It’s really the Fed that has responsibility for price stability,” Federal Reserve Chair Jerome Powell said on May 4. The central bank is currently mapping out the steepest interest-rate hikes since 1994. But that’s ushering in its own dangers: A growing number of economists now warn of a recession in the next two years.
“Unemployment has always been at the forefront of the mind of the party, but inflation hits everybody,” says Al From, a former staffer in Carter’s White House and founder of the Democratic Leadership Council. “The things that do the most political damage are the combination of high prices for gas, food, and rent.”
Although Americans haven’t experienced rapid inflation in decades, From’s old boss was one of several presidents bedeviled by seemingly uncontrollable price increases in the 1960s and ’70s. President Richard Nixon froze wages and prices for varying lengths of time, and President Gerald Ford’s team emblazoned the motto “Whip inflation now” on campaign buttons. He lost the election to Carter, only for the issue to contribute to Carter’s own reelection defeat by Reagan.
The inflation of the time wasn’t tamed until the Federal Reserve, led by Chair Paul Volcker, ratcheted up the federal funds rate to 20%. A pair of recessions followed, though the move is now credited with stabilizing prices for decades.
The central bank has so far moved cautiously—too slowly, in the eyes of many critics—to act against consumer price inflation, which climbed to an annual rate of 8.5% in March. The Fed announced a half-percentage point rate increase last week, its largest hike since 2000, and Powell said to expect similar increases in June and July.
Congressional Democrats are urgently cobbling together legislation they hope will slow or reduce prices, with Senate Majority Leader Chuck Schumer particularly focused on bolstering the reelection hopes of the four most vulnerable incumbent Democrats: Mark Kelly of Arizona, Raphael Warnock of Georgia, Catherine Cortez Masto of Nevada, and Maggie Hassan of New Hampshire
Yet the various approaches under consideration are piecemeal in nature, and most lack the potential for either immediate or broad impact. They include legislation to encourage domestic semiconductor manufacturing, suspend the 18¢-per-gallon gas tax, increase competition in the beef and poultry industries, and strengthen the Federal Trade Commission’s authority to go after oil companies that some Democrats have accused of price gouging.
Even if they pass something, “how quickly will that happen? And how many of these items will become law?” says Alec Phillips, chief political economist at Goldman Sachs.
Representative Sean Maloney of New York, who leads the House Democrats’ campaign organization, says: “Voters understand that we don’t have a magic wand, but they want us working on the problem. You don’t hear me saying it’s not a political challenge when gas prices are too high, or when the pandemic has disrupted our supply chains. We’re doing the hard things to fix these problems, and that counts for a lot with voters.”
Inflation is “devastating to families, that’s why it’s going to be devastating to the Democrats,” says Scott of Florida, who heads the Senate Republicans’ campaign committee. “Their ideas aren’t what the public wants. They don’t want more spending. People are scared to death of this inflation.