The experience of the last Democratic president who presided over a significant bout of inflation wasn’t a happy one, and if the Biden White House isn’t haunted by that precedent, it isn’t paying attention.
Arguably, galloping inflation did more than anything else to unravel Jimmy Carter’s presidency.
Of course, we aren’t anywhere close to the late 1970s, when inflation hit double-digits. But the latest numbers — with prices increasing 6.2%, the biggest annual increase in more than 30 years — should be a fire bell in the night for Democrats.
There have been two crises President Joe Biden created or exacerbated, at the southern border and in Afghanistan, and the latest numbers point to the possibility of a third and even more consequential one.
Large-scale forces are at play in the rising prices. His policy program has tended to make the problem worse rather than better, though, and the eroding buck is going to stop with him regardless.
For the longest time, the White House’s response to inflation concerns was to high-handedly dismiss them. The White House scoffed at economist Larry Summers when he warned earlier this year that fiscal stimulus on a World War II-scale might “set off inflationary pressures of a kind we have not seen in a generation.”
Contra Summers, White House economic adviser Jared Bernstein predicted in April that inflation would rise modestly for several months before fading back to a lower level.
Well, here we are, close to the end of the year, with inflation indeed at its highest level in a generation.
Bernstein called rising prices “transitory,” a word that has been used so frequently by inflation-doubters that it’s become parodic. John Maynard Keynes famously said, “In the long run we are all dead,” so in a similar spirit, it might be that everything is eventually transitory.
Rising prices are being driven by a global mismatch between demand and supply as the economy recovers from the pandemic while disruptions in production persist. At the same time, bottlenecks are disrupting the U.S. supply chain.
Inflation in the U.S. has been worse than elsewhere around the world, and Biden’s agenda clearly wasn’t designed with an inflationary environment in mind.
With gas and fuel oil prices up 50% or more over the past year, maybe it isn’t such a good time to be pursuing a campaign against fossil fuel producers.
With the country already awash in federal dollars from the spending bills that have gone out the door over the past 18 months, perhaps it isn’t a great idea to layer massive new spending on top.
With labor shortages and supply disruptions plaguing the economy, it might not be advantageous to continue to stoke demand with various payments and subsidies while discouraging supply, either by making it easier for people to stay out of the workforce or by raising taxes and tightening regulations.
Biden is now redefining his infrastructure and Build Back Better proposals as anti-inflationary, though no one ever mentioned this when the bills were being conceived or sold over the past year.
Biden’s best bet is that his jawboning and pushing at the ports and other points along the supply chain can make a difference, while companies untangle the mess over time.
In the meantime, the global energy crunch could resolve itself as supply catches up to demand.
That would presumably diminish inflation next year. What is not going to work is trying to talk people out of the lived reality of higher prices.
It avails workers nothing if rising wages don’t keep up with inflation. According to the Bureau of Labor Statistics, real average hourly earnings fell 1.2% from October 2020 to October 2021 and dropped 0.5% from September to October of this year.
Whether prices continue to outstrip wages might be the best metric for the scale of Democratic congressional losses next year and the ultimate fate of Biden’s presidency.
Rich Lowry is the editor of the National Review.