On the campaign trail in 2020, and even since he entered the White House last year, President Biden and some of his top advisors argued that higher federal spending would reduce inflation. You’ve got to be kidding, right?
Fortunately, the American people are NOT buying it – not by a longshot!
The American people now believe INFLATION is the most important issue facing the economy and the country, and they don’t think President Biden is paying enough attention to it.
Most Americans are too young to remember the inflationary surge of the late 1970s and early 1980s, which is why the return of high inflation has come as such a shock. Many economists were caught flat-footed as well. They argued for a year after prices began rising that this phase of the economic recovery would be “transitory” (temporary).
That is until the CPI report revealed earlier this month that the annual rate of inflation had reached 7.5%, the fastest pace in 40 years.
Since the New Deal, Americans have come to believe that presidents exercise considerable control over the economy, and they expect President Biden to do something about inflation. Shortages of goods on grocery store shelves and delays receiving goods ordered online have convinced the people that unclogging the supply chain is a critical part of the solution.
But despite the administration’s claims, Americans haven’t seen much progress on this front. The contrast between the high visibility of the pandemic task force and the lack of a similar supply chain task force has been dramatic, especially because the people now care more about rising prices than falling infection rates.
Many Americans now understand there is a real connection between federal spending and inflation, and the administrations’ argument that its legislative agenda is anti-inflationary has fallen flat. All presidents face unexpected disruptions to their plans. For Biden, inflation is it.
Several recent polls bear this out.
According to a recent CNN poll, 7 in 10 Americans think the government isn’t doing enough to reduce inflation and relieve disruptions in the supply-chain. Against this backdrop, it’s not surprising that just 38% approve of the president’s handling of the economy and even fewer – 30% – his handling of inflation.
In a recent CBS/YouGov survey, 58% of Americans said Biden wasn’t focusing enough on the economy and even more – 65% – said this about inflation. Only 33% say Biden and the Democrats are focusing on issues they care about the most.
In the absence of a high-profile anti-inflation effort, the people are reaching their own conclusions about the administration’s agenda. According to a recent Politico/Harvard survey, 46% believe that enacting the president’s “Build Back Better” (BBB) proposal would increase the rate of inflation; just 6% think it would decrease inflation.
A recent Economist/YouGov survey also shows that inflation has become the dominant factor determining the voters’ view of the economy. Asked to identify the most important measure of how the economy is doing, 52% pointed to the rising cost of goods and services, compared to only 17% for unemployment and jobs.
Although the Biden administration wants Americans to focus on rapid job creation and the sharp decline in unemployment, it seems the people are more likely to emphasize rising prices until the pace of inflation abates. This explains why so many Americans disapprove of Mr. Biden’s economic performance – and why it is undermining his presidency.
I should also point out that this trend in rising prices is probably not over. The Producer Price Index (wholesale prices) has risen at an annual rate of 9.7% the last two consecutive months in a row – the highest level since 2000. Those price increases are coming our way soon.
With inflation at 7.5%, the highest rate since 1982, and the Federal Reserve set to raise interest rates several times, you would think the president and Congress would be looking for ways to reduce the spending spree in Washington. But no. And it’s not just the Democrats – Republicans want to increase spending as well.
Remarkably, bipartisan discussions abound to increase this year’s federal budget by at least 16% – almost a quarter of a trillion dollars. It is hard to recall a greater disconnect between economic reality and public policy in American history.
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