In March, I was a guest at a dinner discussion hosted by a progressive advocacy group in New York. When the conversation turned to Joe Biden’s low approval ratings, another attendee brought up the biased media coverage of the president’s economic performance, which seemed to be a thorn in the side of almost everyone around the table. Ta. I quickly agreed that the positive news about Biden’s efforts to stimulate jobs, GDP, and manufacturing investment didn’t get the attention it deserved, especially when compared to the deluge of coverage about inflation. But I also pointed to governments across the political spectrum in other countries that have experienced large increases in consumer prices, such as the UK, Germany and France. Inflation appeared to be poisonous to all incumbents, regardless of location or political affiliation.
At this point, with U.S. inflation down to pre-pandemic levels, I was still hopeful that there would be plenty of time for national sentiment to change and Biden’s approval ratings to recover. . Of course that never happened. A network exit poll conducted by Edison Research found that 75 percent of voters in last week’s election said they had experienced moderate or severe hardship due to inflation over the past year, and about two-thirds of this group I voted for Donald. Mr. Trump. The political half-life of post-COVID-19 inflation shocks turns out to be long. Kamala Harris and the Democratic Party join Rishi Sunak’s Conservative Party, Emmanuel Macron’s Renaissance Party and a number of other incumbent MPs who have been punished by disgruntled voters. The Financial Times reported that “all ruling parties in developed countries going into elections this year have lost their share of the vote, the first time in almost 120 years.”
To be clear, I am not claiming that economic factors are solely responsible for the U.S. results. Immigration, culture wars, President Trump’s disparaging appeals, and other factors all came into the mix. But anger over high prices clearly played a role, raising questions about what the Biden administration could have done to counter the global anti-incumbent wave. This is a complex issue that cannot be fully addressed in one column. But one starting point is the White House itself, where staff from the Council of Economic Advisers (CEA) and the National Economic Council spend much of their time analyzing the spike in inflation and considering options to address it. spent.
In July 2021, when inflation was rising sharply, CEA published a blog post that drew historical comparisons to the period immediately after World War II, when prices rose as a result of supply shortages and pent-up demand. “If the economy comes fully online and pent-up demand levels off, inflation could fall quickly.” This analysis turned out to be quite prescient, as inflation fell sharply in late 2022 and early 2023. It was certainly more prescient than another comparison that had been touted in the context of the 2020 wage-price spiral. In the 1970s, inflation rates soared into double digits. But inside the White House, Biden’s economists faced new questions. Why is public sentiment about the economy and the president still so bleak, even though inflation rates are falling? “We quickly realized that the problem wasn’t just about inflation,” said Ernie Tedeschi, the CEA’s former chief economist who left the administration earlier this year. “People were still going to the store and seeing high egg prices and high milk prices.” Even if the inflation period ended, prices wouldn’t magically return to where they were before the inflation started. Not.
The Biden administration had already taken steps to address supply shortages and rising energy prices. In 2021, we will establish a supply chain task force to focus on modest but essential initiatives such as eliminating backlogs at U.S. ports and relaxing meat labeling regulations, and as a result, bring more products to market. I was able to send it to In 2022, as oil prices soared in the wake of Russia’s invasion of Ukraine, the administration sold more than 40% of the U.S. strategic oil reserves (and then refilled them at lower prices, benefiting taxpayers). . Both of these policies were successful in their own right. “But at the end of the day, it’s clear that prices still moved as expected,” Tedeschi said. “While the White House would like to think it was able to provide some marginal support, the main means of combating inflation was the Federal Reserve’s monetary policy.” ).
One of the issues in recent years has been whether this system of division of labor, which has become the standard in developed countries including the United States, has been an adequate response. Economist Isabella Weber, who teaches at the University of Massachusetts Amherst, said that as inflation soars, corporate profits soar across many industries, suggesting that companies are taking advantage of the situation to boost profits. He emphasized the fact that there are many companies in the market and advocated price controls. . Weber recently argued that such policies could not only limit profiteering but also help fight political extremism fueled by high inflation. “Can we finally have a serious conversation about anti-fascist economics?” she wrote to X last week.
Most U.S. economists, including those close to President Biden, remain skeptical about the effectiveness of price controls, believing they could lead to severe distortions and supply shortages. “I try to be humble, but I don’t know how they helped me,” Tedeschi said. “People complained about inflation. If we had price controls, they would have complained about shortages. It would still have been nailed to the president.” Perhaps, but seriously. Imposing strict price controls was not the only option to respond to public anger. As the profits of big energy companies soared, the UK introduced a windfall tax on profits, which was later raised and remains in place today. Germany has imposed targeted caps on natural gas and electricity prices and introduced winter fuel subsidies for businesses and households. To my knowledge, the Biden administration has never seriously considered such an option. But it is also true that they have had little lasting political impact, and they certainly have not been able to turn around the political fortunes of the parties that introduced them.
Even if there were no easy policy solutions to the political problems facing the Biden administration, could voters’ concerns be better addressed with rhetoric? William Galston, a fellow at the Brookings Institution who worked in the Clinton administration, said last week that Mr. Biden should have pivoted sooner from focusing on job creation to focusing on the cost of living. “He was stuck in a very traditional ‘work, work, work’ mentality,” Galston said. “That was a fundamental mistake.”
While Biden’s track record on GDP growth and job creation is truly admirable – the economy has added 16 million jobs since January 2021 – there is perhaps something to this criticism. For a while, the White House appeared unaware of the frustration and anger that soaring inflation had caused. Still, Mr. Biden has increasingly spoken out about high prices since early last year, seeking to place some of the blame on corporate takeovers. He announced measures to crack down on “junk fees” and criticized “shrinkflation” and “price gouging”, but his efforts received little praise in the media or elsewhere. The administration also sought to tout the landmark steps it has taken to reduce health care costs through the Inflation Control Act of 2022. Caps insulin prices for retirees, authorizes Medicare to negotiate prices on some drugs, and limits out-of-pocket costs.
After Harris replaced Biden as the top Democratic candidate, she vowed to make lowering the cost of living a top priority. He also outlined a number of proposals to help low- and moderate-income families, including expanding the child tax credit, new subsidies for first-time homebuyers, and allowing Medicare to pay for home care. did. “One of the biggest problems with the recent wave of price shocks is that even after food and gas prices have stabilized, housing and childcare prices remain unaffordable, creating a huge burden for middle- and working-class families. “For decades,” Felicia Wong, president and CEO of the Roosevelt Institute, a liberal think tank, told me. Harris’ proposal was designed to address these issues.
But the bottom line is that all of this is a convenient way for voters to vent their frustrations, even though overall prices are still too high and Biden and Harris are not entirely responsible. It did not dispel public awareness. “If people have great ideas about how we could communicate more effectively about inflation, I’m open to listening,” Tedeschi said. “But we’ve tried different things, and I don’t think there’s any way to talk around it because it’s so real.”
That seems to be the conclusion. The great irony, of course, is that the candidate who promises to further raise prices by imposing blanket tariffs on imported goods emerged as the winner last week. ♦
