A few weeks ago, I wrote a piece suggesting that inflation could be the dominant issue in 2022 – even though few people were talking about it.
Well, after today, a lot more people will be talking about it – with newly released data suggesting that prices for everyday goods are higher than they have been in more than THREE decades.
Prices have surged more than 6% year over year, according to the Bureau of Labor Statistics.
As CNN’s Anneken Tappe notes:
“Rising inflation has been a hallmark of the pandemic recovery thanks to a potent mix of rampant demand, raw material shortages and choke points along the global supply chains. And the jump in energy costs is only making it worse.”
She also quotes Rick Rieder, BlackRock’s chief investment officer of global fixed income, suggesting that the stimulus money passed by Congress and signed into law by President Joe Biden earlier this year made things worse, not better, as it “bolstered savings, household wealth and ultimately demand.”
Inflation is such a potent political issue because a) it’s relatively easy to understand (your money doesn’t buy as much as it once did) and b) it affects every American.
To illustrate that second point, I’d note a tweet by CNN’s Ryan Struyk detailing the year-over-year price increases across a variety of goods and services:
That pretty much covers, well, everything – from grocery shopping to driving your car to keeping your house lit and heated as we head into the winter months.
Inflation is no esoteric topic – like, say, the debt ceiling. It is something that confronts every American every day in some way, shape or form.
For his part, President Biden insists that this latest inflation surge is only temporary – saying that energy prices, a major driver of inflation, are already beginning to come down from recent highs.
“Inflation hurts Americans (sic) pocketbooks, and reversing this trend is a top priority for me,” Biden said in a statement in the wake of the inflation report on Wednesday morning. (The President had an event at the port of Baltimore that afternoon seeking to draw attention away from the inflation problem and back to his infrastructure win.)
Not everyone – even in Biden’s own party – was convinced.
“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” wrote West Virginia Democratic Sen. Joe Manchin in a tweet. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”
(Sidebar: The Federal Reserve had drawn considerable criticism for suggesting rising prices due to inflation were “transitory.”)
There’s no question that the Biden White House is now aware of how big a threat rising inflationary prices are to not only his reelection chances but, more immediately, his party’s hopes of keeping the House and Senate majorities next November.
The Point: Being aware of the problem isn’t the same thing as knowing how to fix it. And that’s the conundrum Biden and his party now face.