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President Biden is boxed in by high inflation, leaving him with few options to take the heat off on an issue that is hurting his party politically.
Biden has limited control over inflation beyond proposing policies and investments that could take months, if not years, to make an impact.
It’s also hard for the president to pass the buck on the matter.
The Federal Reserve is charged with handling inflation, and it is increasingly under scrutiny for moving too late to raise interest rates to take the heat off rising prices.
Blaming the Fed and its GOP chairman might be a normal move for a typical Democratic president.
But it would be a tough one for Biden to pull off.
He just nominated Fed Chairman Jerome Powell to a second term, and the Senate confirmed him on Thursday.
That doesn’t make Powell an effective scapegoat for the White House — even if Biden was looking to put the blame on the chairman.
The White House has sought to compare its policies to those of a possible GOP administration in an effort at self-defense.
It’s not the greatest option, but politically it might be the best bet Biden has while the Fed raises rates and the country hopes for a break on rising household costs.
“We’re in a period now where this is much more of a narrative battle than a policy battle,” said Bill Galston, chair of the Brookings Institution’s governance studies program and a former domestic policy aide to former President Clinton.
“The sad fact is that, aside from actions by the Federal Reserve board, there is relatively little that policy can do in the short term to affect the inflation numbers very much,” he added.
Inflation has surged to four-decade highs over the past year amid the rapid recovery of the U.S. economy from the depths of the pandemic. While the U.S. has added more than 8 million jobs since Biden took office and pushed the jobless rate down to pre-pandemic levels, consumer prices rose 8.3 percent over the past 12 months, according to inflation data released Wednesday by the Labor Department.
Both Biden and Powell voiced confidence last year that inflation would cool as the pandemic faded and businesses worked through labor and supply shortages. They also resisted pulling back on economic support last year as the economy improved, fearing another wave of COVID-19 could upend progress.
While many economists agreed with Biden and Powell, other policymakers, investors and economic officials warned the combined fiscal and monetary stimulus would push the economy over the edge. Former Treasury Secretary Larry Summers, who was passed over by former President Obama to lead the Fed in 2014, was among the fiercest critics of both the White House and Fed’s patience in the face of inflation.
Most economists now agree Summers and other critics were right to fear the impact of additional stimulus from Biden’s American Rescue Plan — the $1.9 trillion stimulus bill signed in March 2021 — and the Fed’s resistance to raising interest rates sooner. But neither Biden’s critics nor supporters anticipated a year ago how long COVID-19–related lockdowns would snarl supply lines in China or how the outbreak of the war in Ukraine would severely restrict the supply of oil, natural gas, food and other essential commodities.
“I just think he is in a really bad box because of this. Inflation is largely a global, geopolitical phenomenon that is just not under the Biden administration’s control,” said Josh Bivens, director of research at the Economic Policy Institute. “I think he’s in a really bad spot for reasons kind of entirely out of his control.”
Biden has largely respected the Fed’s role as an independent entity rather than scapegoating the central bank, in sharp contrast to former President Trump. The former president repeatedly berated and threatened to fire Powell after he refused to cut interest rates exclusively to help win Trump’s trade war with China and only reversed his views after the Fed sprang into action to support the economy in March 2020.
Biden thanked the Senate for confirming Powell, and his other Federal Reserve nominees, while reiterating that tacking inflation is his “top domestic priority.”
“The Federal Reserve plays a primary role in fighting inflation, and these well-qualified members of the Board will bring the skill and knowledge needed at this critical time for our economy and families across the country,” the president said in a statement on Thursday.
Bivens said the White House has been “pretty strong that the Fed should be largely independent and certainly the executive branch should not be leaning on them one way or the other.”
“Trump obviously broke that norm,” he added. “They definitely are going to adhere to the norm that you just don’t bark at the Fed.”
Turning on the Fed would likely do little political good for Biden, particularly after the Senate confirmed Powell and two of his other nominees this week. The president though has been sparring with Sen. Rick Scott (R-Fla.), turning to a prominent GOP senator at odds with his own party over a controversial tax proposal.
Every speech from the president on inflation this week has included a stab at Scott and his proposed tax plan, which the White House has declared is representative of all Republicans’ economic agenda.
Other Republican lawmakers have either distanced themselves from Scott’s proposal or declined to embrace it. It calls for imposing federal income taxes on Americans who currently pay none and sunsetting all federal legislation after five years, presumably including programs such as Social Security and Medicaid.
Scott is the head of Senate Republicans’ campaign arm and in charge of the Republicans’ efforts to win Senate seats and flip the majority. On Tuesday, White House press secretary Jen Psaki said, when asked if there are other Republicans she can name behind Scott’s tax plan: “Rick Scott is not a random senator. He is literally in charge of winning back the Senate for Republicans and what the plan is.”
“I call it the ultra-MAGA plan, Make America Great Again plan,” Biden said of Scott’s proposal in remarks on Wednesday. “Right now, the majority of our Republican friends … don’t want to solve inflation just by lowering the cost. They want to solve it by raising taxes and lowering your income.”
The back-and-forth also escalated this week when Scott said Biden should resign to solve high inflation and Biden proclaimed Scott “has a problem.” Other congressional Republicans have said they are working on a plan to combat inflation, but nothing has been introduced and until then the White House is expected to keep referring to Scott’s plan as the Republican plan.
“It’s certainly true that the Republicans are offering nothing in terms of something that would bring inflation down in any reasonable way, or bring it down, period,” Bivens said. “Two people arguing about how to stop it, there’s really no good solution out there. In my mind, it’s just don’t do something dumb in terms of the inflation we’re seeing.”
Morgan Chalfant contributed.
