WASHINGTON, (Reuters) – U.S. President Joe Biden’s economic advisers defended his policies yesterday amid rising inflation that they said was a global issue related to the COVID-19 pandemic, not a result of the administration’s programs.
U.S. consumer prices last week posted their biggest annual gain in 31 years, driven by surges in the cost of gasoline and other goods. Republicans have pounced on inflation worries, claiming that the increase reflects Biden’s sweeping spending agenda.
“There’s no doubt inflation is high right now. It’s affecting Americans’ pocketbooks. It’s affecting their outlook,” Brian Deese, director of the White House National Economic Council, said on NBC’s “Meet the Press.” “But it’s important that we put this in context. When the president took office, we were facing an all-out economic crisis.”
The United States is hardly alone in enduring a bout of stiff inflation, with the Organization for Economic Cooperation and Development showing inflation running high across its 38 member countries and oil prices quadrupling in the last 18 months as economies reopened from COVID-19 shutdowns.
On Monday, Biden is scheduled to sign a $1 trillion bipartisan infrastructure bill that is expected to create jobs across the country by dispersing billions of dollars to state and local governments to fix crumbling bridges and roads, and expanding broadband internet access to millions of Americans.
Treasury Secretary Janet Yellen and Deese in separate television appearances said they expect that measure, as well as the $1.75 trillion “Build Back Better” domestic spending and climate investment bill to help bring down inflation.
“There’s an urgency to act,” Deese said on CNN. Deese said he was confident that House of Representatives Speaker Nancy Pelosi would bring the “Build Back Better” bill to a vote this week. That, however, will only be a first step as the Senate has not yet taken up the bill, and Democratic divisions could threaten its chances in that chamber.
Senate Majority Leader Chuck Schumer in an open letter to fellow Democrats on Sunday said his chamber will not take up the bill until the House passes it. Congress faces an extremely crowded agenda in the month ahead as it also needs to avert an economically catastrophic debt default by the federal government and a partial government shutdown that would be politically embarrassing for Democrats.
SLIDING APPROVAL
High inflation is eroding wage gains, adding to political risk for Biden, whose approval rating has been falling as Americans grow more anxious about the economy. Broadening inflationary pressures could also complicate the Federal Reserve’s communication. The Fed this month restated that high inflation is “expected to be transitory.”
“The problem is the Democrats are now saying we want to go all in with this massive tax and spending bill,” Republican Senator John Barrasso said on ABC’s “This Week.” “People are going to pay higher prices.”
The White House regularly cites support for the Build Back Better plan from 17 Nobel laureates who say it will ease longer-term inflation.
Biden’s $1.9 trillion American Rescue Plan stimulus package in March helped Americans weather the pandemic and today spending is strong and demand is strong, Yellen said on CBS’ “Face the Nation.”
However, the supply of goods and of workers remains low, she noted, and the federal government is scrambling to unblock global supply chains affected by the pandemic.
Yellen has said she expects prices to go back to normal by the second half of next year if the pandemic continues to wane.
“The pandemic has been calling the shots for the economy and for inflation,” Yellen said. “And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”
Biden and his top economic advisers have for months predicted that inflation would be a short-term problem.
Asked on CNN’s “State of the Union” if they were wrong, Deese said, “No, I don’t think so” and pointed to the strength of the U.S. economic recovery.
Former Treasury Secretary Larry Summers, a Democrat who warned in February the American Rescue Plan could fuel inflation, said on Sunday he supported both the infrastructure and Build Back Better bills because they make long-term investments.
“We will sacrifice our country’s future …and we won’t make any meaningful contribution to reducing inflation, if we vote down this bill,” Summers said on CNN’s “Fareed Zakaria GPS.”