However, the political conversation about inflation is not very good. In fact, it’s largely a puppet show, with enough artifice to go around between all the actors involved.
Those dramatic allegations have put the GOP in a strong position to gain in the midterm elections this fall. But substantively, they omit a lot of contradictory evidence.
The resulting inflation has undeniably caused economic pain for millions of families, eroding the purchasing power of higher wages. At the same time, they aren’t “crushed” bad enough to keep them from spending money at a steady pace.
That’s because families up and down the income scale, thanks to Covid relief checks, generally still have more money than they did before the pandemic; in the jargon of economic analysts, ‘household balance sheets’ have still ‘saved too much’. Unemployment has fallen to below 4%.
“The excess savings were enough to cushion the impact of falling real wages on spending, even for lower-income households,” said Moody’s chief economist, Mark Zandi. “U.S. households are financially well off for the most part.”
Biden’s White House was hardly alone last year to believe inflation would be short-lived. So did the Federal Reserve, the government agency responsible for monitoring and controlling inflation through monetary policy stewardship.
The role of the media is always to hold government accountable. But the unelected, relatively obscure Fed does not hold daily press conferences.
The White House, home to the most visible civil servant of all, does. So journalists constantly question the president about solutions to rising prices, even though no White House in a free-market economy has much power to bring them down.
The chair’s role is to answer the questions. For unlucky voters, “not much I can do” is enough.
Presidents are feeling particular pressure to respond to rising gas prices. Rising numbers on signs at the pump — driven by oil supply and demand — particularly enrages voters.
While the inflation debate is largely fake, it’s not entirely fake. Presidential policies can exacerbate inflation.
Presidents can also moderate inflation, if only on the margins. Government efforts to ease price pressures by facilitating supply chains are helping a little. This also applies to the record release of oil from the Strategic Petroleum Reserve.
The Fed chairman he inherited was Jerome Powell, a Republican appointed to that position by Trump. President Barack Obama had first tapped Powell to run the Fed in 2011.
At the end of last year, Biden decided to retain Trump’s chairman. On May 12, 80 of the 100 senators — including an overwhelming majority of both Republicans and Democrats — voted to confirm the president’s election.