Jim Geraghty tells us what's on his mind:
How Can a Tired, Old, Overwhelmed President Respond to Terrible Inflation Numbers?
Earlier this week I wrote, “we don’t know precisely what the national inflation numbers for May will be, but we can all sense they’re not going to be good.” It turns out that May’s inflation numbers were the worst since December 1981.¹ The confident declarations that “inflation has peaked” in February and April and May now appear to be whistling past the graveyard, as inaccurate as President Biden’s confident assertion in July 2021 that inflation was temporary and transitory.
Golly. If only we a had a lively, young, brilliant president in office. Just imagine what inflation would be like!
Answer: the same as it is now. There is nothing Joe Biden or anyone else can do about short-term inflation. In the longer-term, we can get our supply chains back in order; we can work to get gasoline prices down; and the Fed can manipulate interest rates and asset purchases. This will eventually get inflation levels back to normal.
Now, if you want to blame Biden for passing a big stimulus bill that probably caused some of the inflation we're experiencing right now, fair enough. There's a good case for that. But using high inflation as an excuse to call Biden senile is beneath us all. At a minimum, Biden's mental acuity is better than Donald Trump's and better than Ronald Reagan's during his second term. What's more, y'all could have voted for Hillary in 2016 if having a sharp, non-deranged mind in the Oval Office were really so important to you. But it wasn't, was it?
¹Just for the record, this is technically true. However, inflation in May was 8.58% compared to 8.54% in March. So it's sure not a record by much.
Though it would be great if the President pushed for excess profits taxes on fuel producers. At the very least he could use the Bully Pulpit to go after these companies. https://www.cnn.com/2022/06/09/politics/white-house-oil-profits/index.html
Yes! Like +10.
52% of yearly recorded inflation is now energy. 75% for May. Supply chain issues have already eased.
It's stupid hedge fund globalist morons who decided in May to speculate oil prices and the move in gas futures is total crap.
Fix the price, nationalize oil, build refinery capability to handle dirty oil, kill the financialist frauds. Come at them at the rage of the mob.
When I got to this page, I saw the usual “2 thoughts on …” subheading. Considering that one of the comments was from Sog, that’s using ‘thought’ very loosely …
First, we need to talk about what's driving it. Are we talking about volatility or exogenous shocks? I think we're talking about exogenous shocks. If that's the case, then we have a lot of levers we could pull:
-- On certain imports, we could slash or pause tariffs.
-- On other imports, we could use the DPA to displace shortfalls by flooding the market w/ subsidized domestic production.
-- On rents, we could offer tax credits for units at/below 80% (or whatever arbitrary number) market rate.
-- On energy, we could add targeted federal subsidies for local (not state) public transportation systems to temporarily (6-months or 1-year?) halve or eliminate rider fees.
Of course, every action distorts markets and maybe some or all of these won't work perfectly. But, if these are temporary, the effects wane after they're lifted. And importantly, it would show that you're trying to do something.
Throwing up one's hands and saying, "we can't do anything about it" is about the most frustrating thing people can hear.
Get after oil/gas traders and arrest them.
With every wingnut in America doing their best to keep inflation high until November?
Even if it does come down they'll never stop complaining about it.
Like that matters. Wall Street is taking a lot of blame along with Putin.
Executives and managers throughout the country make decisions every day that ultimately build toward more or less cost increase, it only takes a few of them at the same time to start a trend.
And who is the Republican who blames Putin for inflation? I can imagine there may be one but he sure isn't getting any airplay.
Most of your suggestions require Congressional action; that means that the key point, that a younger more dynamic president that Biden couldn't do any more than biden has, remains true.
Half require congressional action. Of those, because they affect revenue/outlays, can be done by reconciliation.
Good points by Kevin all the way around.
Of course, if one thinks the stimulus was a large factor, one has to explain how it managed to push inflation even higher in Europe. Also, one has to look at the size of the stimulus in comparison to the income lost from closed businesses, layoffs, etc.
As I keep saying, inflation is technically a loss in value of a currency. Yet the dollar is up, over the last year, vs. the Euro, sterling, the yen, the renminbi, the rupee …
Dang, forgot to close the tag.
Dude, it's all energy now.
If you're going to blame stimulus, I hear Pres. Trump not only have a big one during his tenure, he supported the second one as well.
Inflation would be higher anyways because of pent-up COVID-19 demand (people may complain about gas prices but they're still filling up their tanks anyways and travelling) and pandemic supply chain problems and rising wages. The Feds' actual target rate should be four percent not two. For way too long the economy was under-inflated and wages suffered workers (not CEOs). That's it at eight percent is all due to energy, particularly a war disrupting supply and (thanks to Pres. Trump) a Saudi oil production cut during the pandemic to save U.S. producers. Who's to save Pres. Biden couldn't do the same thing and threaten U.S security arrangements the way Trump did and Saudis pump more oil?
Canada's covid stimulus, as a percentage of GDP, was actually larger than the US's, but Canada's inflation rate is lower.
Inflation is a loss in value of a currency in purchasing power, not in exchange rate. Thus the CPI.
So if the dollar has lost purchasing power against domestically-produced goods and services, it has gained purchasing power against imported goods. But prices fluctuate constantly, so any currency is always “losing purchasing power’ against some goods, gaining it vs. others.
A stronger dollar means an increase in purchasing power for foreign goods only if the rate of appreciation of the dollar is higher than the domestic inflation rate of the other currency.
Also, the link: https://fred.stlouisfed.org/release/tables?rid=17&eid=23340#snid=23347
We could always raise taxes on the 1%, taking money out of the economy and reduce the flow of dollars chasing the next unicorn or going into hedge funds.
Yes! Like +11.
Not just unicorns. I have been wondering lately if house prices, and consequently rents, are driven from the top of the market, which then pulls up prices throughout the lower tiers of the market; think how frequently people are advised to buy the most house they can afford, in a market where ‘turns’ (annual sales/stock) are very low.
And don't forget that lots of homes have been pulled from the residential market and are now "income producing" AirBnB or VBRO. Or the latest twist from Silicon Valley, Pacaso; "Fractional Ownership" of homes.
Fewer homes for sale for residential use makes for higher prices.
For some reason "raise taxes", a sure fire way to remove excess money from the economy especially if it is targeted at people that have a lot of money, is an idea that never gets any traction with the GOP. Go figure.
What Kevin doesn't realize is there is a computer in the Oval Office that asks the president all day, do you want inflation to go up? y/n
If he doesn't sit at his desk all day hitting the n key the inflation will rise. So Joe being sleepy is actually a very serious problem. Little known fact.
A point of view on this inflation thing that seems intuitive to me but which I haven't seen anyone write up is this: we built an economy to sell Bentleys, and if you switch to an economy selling Chevys, there are going to be some transition pains.
What I mean is, so much of the American economy and culture has been built up around huge companies selling overpriced luxury stuff to rich people... An economy is like a battleship, it doesn't turn around fast. If you decide to make the economy more focused on/work better for average people and average products, almost inevitably there's a painful transition period where you've given money to the middle class to buy stuff (i.e., pandemic stimuli) but the products average people want aren't being produced in big enough numbers (for a while) to prevent prices from rising. That's just basic economics.
Am I wrong?
Well, not exactly. There is less oil because of Putin's war, helping to drive up prices at the same time the economy is rebounding from the pandemic years, also driving up prices. The two compound each other too. Every good depends on fuel to get delivered, so high oil prices further drive up prices increased due to high demand. Plus, supply chain bottlenecks, and yes even stimulus money. But, the whole point of stimulus is to prevent a recession, so the only real argument is on timing and not that it was bad. Biden should just go after gasoline and diesel prices with whatever he can, effective or not. Windfall profits taxes could be used in a million different ways--I say dump it into the Social Security Trust Fund!
Well except Putin is selling more oil to Asia. EIA report will trigger selloffs with oil.
https://www.vox.com/2014/5/20/5732208/the-green-lantern-theory-of-the-presidency-explained
Or maybe the Aaron Sorkin theory of the residency: President makes a great speech, and all opposition melts away.
So, this may be Exhibit A on a lack of knowledge of Advanced Econ, but we do know that the job market is tight, and wages have, on average, gone up.
In a capitalist system, isn't it always going to be the case that if costs (wages) go up, prices have to go up too? The profits class isn't going to allow profits to evaporate, after all, absent govenment coercion.
Isn't that basically it?
It seems like we get excited about a strong jobs market, only for reality to set in, again and again.
During every cycle, at least in the US, there is never a real move, by either party, to make parts of the system less capitalist.
The profits class isn't going to allow profits to evaporate…
Profits are up way more than wages are. The profits class didn’t simply prevent their share of the pie from shrinking… they insisted their share of the pie grow faster than workers’ shares.
The irony is that a tax increase is effectively the same thing as an interest rate increase, in the sense of economic stimulus.
Probably better because you could take the money and pay down the debt.
I wonder if anyone has taken a long term look at things and the effect of R tax cuts over say the last 20 years. It's probably not that much but it's more than nothing.
Driving down the price of oil is NOT in the public interest; it may be politically popular, but people have a bad habit of acting, and voting, against their long-term best interests.
Biden caused inflation.
Biden caused Putin to invade Ukraine.
Biden caused COVID.
Biden caused Abbott to not clean up it's act (baby formula production).
Biden caused the mass shootings--it's not the guns.
Biden caused the insurrection.
Biden ....sure has been busy for a senile old man...
For Republicans (and much of the MSM), Democratic presidents are always stupid, incompetent numpties who nonetheless somehow are also secretly supervillians who control everything in the world.
You had me going in the first half, not going to lie...
The past year's inflation hasn't been a single phenomenon triggered by a single event. The last few months have given us the Ukraine war wave of price increases, which are not tied to the mid-2021 stimulus-bill wave. So concluding that inflation will just kept going on this way isn't good thinking.
What do the people with money think? Well, the five-year breakeven inflation rate is still around 3 percent.
It's Congress, not Biden, that needs to be woken up.
Biden officially declared war in June. The import price restrictions should help food.