From startlingly high inflation and empty grocery store shelves to elevated prices at the pump, Americans are frustrated with the state of the economy.
Polls indicate voters are every bit as concerned about the economy as they are about the pandemic. And they feel the government is not doing enough to fight inflation.
President Joe Biden can point to a booming jobs market as evidence of a strong recovery, but he can also expect to face tough questions at Wednesday’s press conference about the economic problems that are making voters anxious right now. Here are a few that could come up:
1.) In December, Biden suggested inflation had peaked — but since then, consumer prices have accelerated to fresh 39-year highs. When can the American people realistically expect inflation to get back to normal levels?
The high cost of living is the biggest problem in today’s economy. Prices of everything from new cars to full-service meals rose at the fastest pace on record in December.
In just the past few days, for example, Peloton (PTON) and Netflix (NFLX) have raised prices and orange juice futures have climbed to three-year highs amid the weakest Florida harvest since World War II.
High inflation is largely a consequence of Covid. Demand has surged as the economy recovers from the pandemic, but supply simply can’t keep up — in part because of Covid-related supply bottlenecks.
2.) The worker shortage is contributing to the high cost of living. Beyond Build Back Better, what additional plans does the Biden administration have to fill vacant jobs? What about ramping up immigration?
The Build Back Better Act could have helped address the worker shortage by making childcare more affordable. That may have encouraged moms and dads to get into — or back into — the workforce.
But Biden’s signature legislation is very much in doubt and the worker shortage persists.
The US Chamber of Commerce has called for doubling the number of legal immigrants coming into America, arguing this be the No. 1 thing the government can do to fight inflation. But it’s not clear there is any appetite in Congress right now for immigration reform.
3.) Not even two months after Biden tapped the Strategic Petroleum Reserve, oil prices climbed to fresh seven-year highs. Doesn’t that show that the SPR wasn’t a real solution? What steps is the administration considering to contain gas prices now?
Biden announced the biggest-ever release of barrels from the SPR just before Thanksgiving. Oil prices have fully recovered their losses.
Prices at the pump now are ticking higher, rising to $3.32 a gallon on Wednesday, according to AAA. That’s just 10 cents shy of the seven-year high set last fall.
The White House has said Biden still has tools to address pump prices. But what are those tools, and under what circumstances does the president intend to use them?
Rising geopolitical tensions have been driving up crude prices in recent days. The potential of a Russian invasion of Ukraine, which the White House has warned might happen at any moment, could send prices much higher. It isn’t clear what, if any, contingency plans the Biden administration is making to cushion an oil shock triggered by a clash between Russia and Ukraine.
4.) By many metrics, supply chains remain severely stressed. What is the administration’s plan to unclog them and ensure grocery store shelves remain stocked?
There have been glimmers of hope on the supply chain front, and yet the situation remains very challenging. That’s keeping pressure on prices.
Peloton cited supply chain problems behind its decision to jack up prices. So did companies like Ikea and Procter & Gamble. And grocery stores have struggled to keep shelves stocked due to a variety of factors, including supply chains, Omicron and bad weather.
In a research report earlier this month, Goldman Sachs said its congestion tracker remains at a level of 10 out of 10, indicating “fully bottlenecked” supply chains. Bank of America said logistics bottlenecks are “showing no signs of easing with US port congestion near record highs and North Europe hitting new highs.”
5.) The Federal Reserve plans to hike interest rates and end its bond buying stimulus program. Does the administration support the Fed’s plans? Is there concern these moves might slow the economy or roil financial markets?
Fed Chairman Jerome Powell, whom Biden tapped for another four-year term leading the central bank, has signaled growing concern about inflation. After months of keeping its foot on the easy money pedal, the Powell-led Fed is finally planning to tap the brakes to cool off inflation and investors have gotten nervous about the impact of the Fed withdrawing support. And there are risks that if the Fed moves too quickly, it might hurt the recovery in the process.
Biden, who has frequently said he respects the independence of the central bank, may not want to weigh in directly on Fed policy. But he could express confidence in the economy’s ability to adapt to a more aggressive Fed.