By Rich Lowry
Friday, November 12, 2021
The experience of the last Democratic president who
presided over a significant bout of inflation wasn’t a happy one, and
if the Biden White House isn’t haunted by that precedent, it isn’t paying
attention.
Arguably, galloping inflation did more than anything else
to unravel Jimmy Carter’s presidency.
Of course, we aren’t anywhere close to the late 1970s,
when inflation hit double digits. But the latest numbers — with prices
increasing 6.2 percent, the biggest annual increase in more than 30 years —
should be a fire bell in the night for Democrats.
There have been two crises that President Joe Biden
created or exacerbated, at the southern border and in Afghanistan, and the
latest numbers point to the possibility of a third and even more consequential
one.
Large-scale forces are at play in the rising prices. His
policy program has tended to make the problem worse rather than better, though,
and the eroding buck is going to stop with him regardless.
For the longest time, the White House’s response to
inflation concerns was to high-handedly dismiss them. The White House scoffed
at economist Larry Summers when he warned earlier this year that
fiscal stimulus on a World War II scale might “set off inflationary pressures
of a kind we have not seen in a generation.”
Contra Summers, White House economic adviser Jared
Bernstein predicted in April that inflation would rise modestly for several
months before fading back to a lower level.
Well, here we are, close to the end of the year, with
inflation indeed at its highest level in a generation.
Bernstein called rising prices “transitory,” a word that
has been used so frequently by inflation-doubters that it’s become parodic.
John Maynard Keynes famously said, “In the long run we are all dead,” so in a
similar spirit, it might be that everything is eventually transitory.
Rising prices are being driven by a global mismatch
between demand and supply as the economy recovers from the pandemic while
disruptions in production persist. At the same time, bottlenecks are disrupting
the U.S. supply chain.
Inflation in the U.S. has been worse than elsewhere
around the world, and Biden’s agenda clearly wasn’t designed with an
inflationary environment in mind.
With gas and fuel-oil prices up 50 percent or more over
the past year, maybe it isn’t such a good time to be pursuing a campaign
against fossil-fuel producers.
With the country already awash in federal dollars from
the spending bills that have gone out the door over the past 18 months, perhaps
it isn’t a great idea to layer massive new spending on top.
With labor shortages and supply disruptions plaguing the
economy, it might not be advantageous to continue to stoke demand with various
payments and subsidies while discouraging supply, either by making it easier
for people to stay out of the workforce or by raising taxes and tightening
regulations.
Biden is now redefining his infrastructure and Build Back
Better proposals as anti-inflationary, though no one ever mentioned this when
the bills were being conceived or sold over the past year.
Biden’s best bet is that his jawboning and pushing at the
ports and other points along the supply chain can make a difference, while
companies untangle the mess over time. In the meantime, the global energy crunch
could resolve itself as supply catches up to demand.
That would presumably diminish inflation next year. What
is not going to work is trying to talk people out of the lived reality of
higher prices.
It avails workers nothing if rising wages don’t keep up
with inflation. According to the Bureau of Labor Statistics, real average
hourly earnings fell 1.2 percent from October 2020 to October 2021 and dropped
0.5 percent from September to October of this year.
Whether prices continue to outstrip wages might be the
best metric for the scale of Democratic congressional losses next year and the
ultimate fate of Biden’s presidency.
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