Opinion | Joe Biden’s Empty Inflation Toolbox

If that’s not enough to unsettle the White House and its allies, consider this: Presidents have almost no power to alleviate the pain of inflation, and the electorate does not give presidents time at all because of this impotence. Take a look inside the toolbox of our country’s chairman of the board and you will find that it does not contain effective tools but is filled with devices that are now out of date or ridiculous or meaningless or politically destructive.

Presidents John F. Kennedy and Lyndon B. Johnson were fans of the “jawbone” – they used their influence to persuade unions and corporations to keep wage and price increases down. But those were times when big, powerful unions – the auto workers, steel workers, Teamsters – and big, powerful corporations like General Motors or US Steel could have a major impact on the economy with their decisions. Who Would Joe Biden “Jaw Bones” Now? The thousands of potential truck drivers whose absence from the road drives up costs? Asian factories where a microchip shortage drove up new car costs, which in turn drove up used car costs? The OPEC + cartel, which has no interest in increasing oil production and may even look forward to $ 100 a barrel?

Richard Nixon tried a much more blunt instrument: in August 1971, he imposed a 90-day freeze on wages and prices, using powers conferred on him by a Democratic Congress. In the short term it worked; but just as a temporary seal doesn’t really fix a leak, once the controls were over, inflation resumed. By the summer of 1974, inflation was over 11 percent, a drag on the economy that undermined Nixon’s reputation even as Watergate waters rise. (As Bill Clinton would later demonstrate, a thriving, full-employment, low-inflation economy helps a politically troubled president.)

When Nixon’s helicopter took off from the White House lawn, Gerald Ford was left with double-digit inflation. His answer was basically encouragement.

Addressing a joint congressional session on October 8, 1974, the President reported: “All advisors agree on only one point: We must now whip inflation.”

What followed was a textbook case of presidential irrelevance. Noting the pain in the grocery store, Ford said, “To stop higher food prices we need to produce more food, and I urge every farmer to produce to their full capacity.” To curb the rising cost of professional services, he said: “The administration will enforce the laws against price fixing and bid fixing more effectively. For example, uncompetitive professional fee schedules and real estate settlement fees need to be eliminated. Such violations will be fully prosecuted by the Ministry of Justice. “

He also asked the Americans to send him 10 energy saving ideas, and finally he showed “the symbol of this new mobilization that I wear on my lapel. It has the single word WIN. I think that says it all. I will urge every American to join this massive mobilization and hold on to it until we win as a nation and as a people. “

The red and white “WIN” button has been changed to a different symbol. Alan Greenspan, then chairman of Ford’s economic adviser, later recalled that the campaign was “incredibly stupid”. New York magazine, in a column ridiculing Ford, featured a clown with a “WIN” button.

But if you’re looking for a president, that one did in fact, it was doing something to curb inflation, albeit indirectly, and it was Jimmy Carter. In appointing Paul Volcker chairman of the Federal Reserve Board, he placed someone in a position of real power who was determined to wield that power fully regardless of the consequences.

With an inflation rate of more than 13 percent in 1980 – “It was the highest and most sustained inflation the United States has ever had.” Volcker remembered – He led the Fed to a historic tightening of the money supply. Interest rates rose staggeringly; at times the key rate reached 21 percent. The consequences were dramatic and ugly – a recession worse than any other since the Great Depression. Four million workers lost their jobs.

“Stagflation” – a toxic combination of inflation and unemployment – contributed to Carter’s 1980 landslide defeat. In 1982 the unemployment rate reached 10 percent, a number that cost Republicans 27 seats in the House of Representatives. In 1984, however, unemployment went in the right direction and fell to just over 7 percent. Economic growth was over 7 percent, inflation had fallen below 4 percent – and Ronald Reagan won a re-election with 49 states.

The United States has not seen a truly worrying rate of inflation since then, and that is another source of pain for Biden and his party. Americans have had no experience of rising prices across the board for decades; 6 or 7 percent inflation is nothing compared to the Carter era, but it looks particularly worrying compared to the recent past.

So what can Biden offer? He can turn to the Strategic Petroleum Reserve – the refuge of presidents’ pasts – which contains what can rightly be called a drop in the bucket of the nation’s energy needs. He and his team can argue that the recently passed infrastructure law will increase productivity by making goods transport more efficient. But that reality is still years away, and the short-term effects – roads, bridges and railways closed for repairs – would actually lead to inefficiency in the short term.

As for the Build Back Better bill – the inflation numbers could make it a lot harder to get this piece of legislation through Congress. Larry Summers, perhaps the most prominent economist warning of inflation, supports legislation. but Recent comments from Sen. Joe Manchin Make it clear that he is in no hurry to provide the 50th vote required for acceptance.

If Biden’s advisors are right, inflation will fall in 2022 as goods flow into stores and car parks where wealthy customers stop bidding on scarce items. But that is more of a hope than a certainty; Last summer’s White House description of the “transitory” nature of this inflation now seems much less convincing, and the prospect of a Christmas season with high-priced or unavailable goods and sharply higher fuel costs bodes well for the already declining approval numbers of the President.

There are good reasons not to weight the Republican arguments that this inflation is due only to what Senator Marco Rubio called the “left maniacs” who ran the government, any more than Richard Nixon or Gerald Ford or Jimmy Carter was to blame for OPEC driving the oil price through the roof decades ago. But that is cold comfort to Biden and the Democrats. Perhaps somewhere in the past there has been an incumbent White House party that did well in an election where inflation was a predominant concern. But if you look back on the last three quarters of a century or so, you will come away with nothing.

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