Sobering inflation report dampens Biden’s claims of economic progress
By Jim Tankersley
President Joe Biden gathered with top Democrats at the White House earlier this week to celebrate their inflation fight at an inopportune moment, as a sobering new report showed just how far the economy still has to go to bring soaring consumer prices under control.
The Consumer Price Index report for August contained a large dose of unwelcome news for the president, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. It showed that inflation had not cooled as White House economists and other forecasters had hoped, and that workers had lost buying power over the past year as prices increased faster than wages.
Another report, from the Census Bureau, showed that the typical American household saw its inflation-adjusted income fall slightly in 2021 from 2020. Perhaps more troubling for a president who has promised to close the gap between the very wealthy and the middle class, it showed that income inequality increased last year for the first time in a decade.
Those developments challenged Biden’s renewed efforts to reframe the economy as a winning issue for him and his party before the midterms — although the president seemed unfazed.
Biden welcomed thousands of supporters to the White House lawn to toast a new law that he says will help reduce the cost of electricity, prescription drugs and other staples of American life.
The event was essentially a rally for the so-called Inflation Reduction Act, which raised taxes on large corporations, targeted nearly $400 billion in spending and tax incentives to reduce the fossil fuel emissions driving climate change, and took steps to reduce prescription drug costs for seniors on Medicare and premium costs for Americans who buy health insurance through the Affordable Care Act.
Biden called the law “the single most important legislation passed in the Congress to combat inflation and one of the most significant laws in our nation’s history.”
“There’s an extraordinary story being written in America today by this administration,” Biden said, adding, “This bill cut costs for families, helped reduce inflation at the kitchen table.”
On Wednesday, Biden headed to the Detroit auto show, where he was slated to champion his policies to bolster manufacturing and low-emission sources of energy.
But the country’s economic reality remains more muddled than Biden’s rosy message, as the inflation report underscored. Food prices are continuing to spike, straining lower-income families in particular. The global economy is slowing sharply, and threats remain to American recovery if European sanctions force millions of barrels of Russian oil off the global market in the months to come.
A possible railroad strike could disrupt domestic supply chains. The White House press secretary, Karine Jean-Pierre, told reporters Tuesday that the president had called union and company leaders Monday in an attempt to broker an agreement to avert the strike.
Most important — and perhaps most damaging for Biden and Democrats — Americans’ wages have struggled to keep pace with fast-rising prices, an uncomfortable truth for a president who promised to make real wage gains a centerpiece of his economic program. Inflation-adjusted average hourly earnings ticked up across the economy in August, the Labor Department said Tuesday, but they remain down nearly 3% from a year ago.
Republicans were quick to criticize Biden after the report Tuesday. “Every day, Americans endure Biden’s economic crisis,” said Rep. Blaine Luetkemeyer, R-Mo., the top Republican on the Small Business Committee. “The Democrats’ inflation continues to drive up costs and leads more and more small businesses and families questioning their future.”
Biden and his aides have celebrated falling gasoline prices on a daily basis throughout the summer. Those decreasing prices have helped inflation moderate from its high point this year, although not enough to offset rising rent, food and other costs last month.
Even as he acknowledges the pain of rapid price increases across the economy, Biden has claimed progress in the fight against inflation, including with the signing last month of the Inflation Reduction Act. On Tuesday morning, he sought to put a positive shine on the August data, saying in a statement issued by the White House that it was a sign of “more progress” in bringing down inflation.
Recent weeks have brought signs of hope for administration officials, among consumers and companies. The National Federation of Independent Business reported Tuesday that its Small Business Optimism Index rose in August as inflation anxiety eased, continuing a rebound from its depths this year. The Federal Reserve Bank of New York reported Monday that consumer inflation expectations were also falling.
Officials inside the administration and at the Federal Reserve say strong job growth and consumer spending this summer have put to rest fears that the country slipped into recession in the first half of the year.
“What is most notable about where we are right now is the resilience of the labor market recovery, the resilience of American consumers and households, and that we are beginning to see some signs that prices may be moderating,” Brian Deese, the director of Biden’s National Economic Council, said in an interview this week.
“There’s more work to do,” Deese said. “But I think that is a signal that the economic decisions that this president has made are bearing fruit.”
But polls continue to show that inflation is hurting Biden and his party at a pivotal moment, as Democrats seek to retain control of the House and the Senate. High prices loom as the top issue for voters in national opinion polls, and Americans say they trust Republicans more to handle inflation and the economy overall than Democrats.
On Tuesday, stock markets recorded their largest daily loss in two years, driven by investor fears of stubborn inflation pushing the Federal Reserve to raise interest rates higher and faster than many expected.