(Trends Wide) — It’s rare for someone in Washington to admit they were wrong.
So Treasury Secretary Janet Yellen’s admission in an exclusive interview Tuesday on Trends Wide that she was wrong to believe last year that inflation was not a long-term threat was a big moment.
The administration could have taken credit for the candor and an unusual expression of humility, but a Treasury spokesman soon tried to gloss over Yellen’s admission, instead emphasizing the unforeseen events that exacerbated inflation, which Yellen had also detailed on Trends Wide.
“I think I was wrong back then about the path inflation was going to take,” Yellen told Trends Wide’s Wolf Blitzer when asked about comments from 2021 that inflation posed only a “small risk.”
“As I mentioned, there have been large, unforeseen shocks to the economy that have sent food and energy prices skyrocketing and supply bottlenecks that have severely affected our economy that I, at the time, didn’t fully understand, but I did. we recognize now,” Yellen said.
Yellen’s statement appeared to be a symptom of a deep political hole facing the White House five months before the midterm elections. Telling Americans that the economy is strong, that there are 8.3 million new jobs, and that inflation should be lower by the end of the year is not working for President Joe Biden.
But Yellen’s honesty aside, Biden’s intractable position was only bolstered Tuesday by the fact that much of his team’s new PR blitz, designed to show the president feels the country’s pain, doubled down. in the same failed formula and a message to voters that while their angst over higher prices is real, the economy is better than they think.
The White House does not lie. The economy is mostly in good shape, especially considering the punishing impact of a once-in-a-century pandemic and the disastrous impact of Russia’s war in Ukraine and the covid-19 lockdowns in China. Consumers are still spending despite higher prices and there are signs of a summer travel boom as the coronavirus looks less of a threat.
But higher inflation rates since the early 1980s mean Americans generally don’t feel what the president says is happening. This kind of disconnect is politically untenable.
A new Gallup poll released Tuesday, for example, underscored the pessimism many American adults feel about the state of the economy, in a way that threatens to doom Democrats in November’s midterm elections and hand power over to Republicans. in Congress.
Only 1% of those surveyed thought current economic conditions were excellent; 13% said they were good; 39% said conditions were fair; and a devastating 46% judged the situation as bad. And 77% of those surveyed said the country’s economic outlook is getting worse.
It is hard to imagine a less favorable political environment for a party that controls the House, Senate and the White House and faces congressional elections. Republicans may not have announced any plans to do better. But the joy of the opposition is that they can sit back and watch the slow nightmare afflicting the party in power.
A new economic boost from the White House to curb inflation
Given this backdrop, it’s no surprise that the White House is launching a month-long focus on the economy designed to convince the country that high prices straining family budgets are the president’s number one priority, despite the biggest war in Europe since World War II and a pandemic reluctant to let loose. Senior administration officials fanned out via cable television Tuesday to bolster Biden’s argument, laid out in a Wall Street Journal op-ed, that his upbringing in a family that suffered when gasoline and food meant that he especially understands what the country is going through now.
But consider these dueling scenes.
Drivers who set off on Memorial Day weekend, which traditionally marks the beginning of summer, looked back at pumps showing near-record average prices just shy of $4.60 a gallon for gas.
The day after the holiday, Biden welcomed Federal Reserve Chairman Jerome Powell to the Oval Office and stressed that he would get out of the way and give the central bank room to do its job of curbing inflation.
“My job as president is not … just (to) nominate highly qualified people to that institution, but to give them the space they need to do their jobs. I’m not going to interfere with their critically important work,” Biden said Tuesday. .
It’s not hard to see that voters’ sense of urgency might not be satisfied by such a formal photo op. Biden’s approach may demonstrate the kind of good governance and respect for the Fed’s independence that was conspicuously lacking in the chaotic Trump administration. But as a political strategy, it seems unlikely to change voters’ perceptions by putting the onus on a body that is being widely criticized for waiting too long to raise interest rates to tackle inflation. Biden supporters might complain that such criticism is rooted in scholarship. But the administration’s problem is one of perception, as voters fail to see the strengths of the economy that the president is trying to emphasize.
The White House’s case is not helped by the fact that, like the Fed, it suffers from a tarnished credibility on inflation, after repeatedly insisting last year that rising food prices and other goods was “transitory”. It’s fair to argue, as Yellen did on Trends Wide, that unforeseen factors, including the war in Ukraine and China’s failure to shake off Covid-19, which has sparked new supply chain reactions, were unexpected shocks that caused previous predictions were wrong.
Such honesty on Yellen’s part about not fully understanding the impact of those shocks is refreshing in a public official. But those nuances won’t show up in the midterm election campaign, which historically was always going to be inhospitable for Democrats, but now looks dire. Republicans will surely take his comments and frame an argument that even Biden’s Treasury secretary admits his economic policies aren’t working.
What can Biden do?
Part of the problem for the administration is that it has already used elements of its political arsenal that can be deployed without significant cost. Biden has released millions of barrels of oil from strategic reserves to combat rising energy prices caused by the war in Ukraine. But pump prices keep going up. Blaming the rise on “Putin’s price gouging,” as the president has done, might feel good politically. But it does nothing for angry drivers.
Biden has also made significant efforts to reduce port congestion fueled by a supply chain crisis that followed the pandemic, when problems with supplies and high consumer demand caused inflation to soar. But he can’t control what happens outside the US, and the global factors that caused the problem are still unfolding. In addition, the expected shortage of grain and sunflower oil caused by the interruption of the harvest and the transport of crops out of Ukraine, a major producer, later this year threatens food shortages and higher prices closer to the day of the elections.
Some analysts have suggested the president could ease some of the pain from inflation by ending Trump-era tariffs on China or encouraging more immigration to curb labor shortages that are contributing to higher prices. But either approach would expose Democrats to Republican claims that they are soft on China or simply opening the country’s borders. Both arguments would be misleading, but they could well be politically profitable for the Republican Party.
In his opinion piece in The Wall Street Journal, Biden touted several measures on his stalled domestic agenda that he said would help lower the cost of living. He called on Congress to pass clean energy tax credits that he said would reduce a typical family’s utility bills by $500 a year. He also said household budgets could be helped by lowering the cost of prescription drugs like insulin and argued that reducing the federal budget deficit could help ease price pressures.
The problem, however, is that all of these steps will take time or require action by Congress. Much of Biden’s domestic agenda has stalled, not only because of Republican obstruction but because of his inability to convince Democrats in the Senate to come together to pass it. A moderate Democrat, Senator Joe Manchin of West Virginia, specifically mentioned inflation as the reason he is not interested in additional government spending.
Given Biden’s limited options, the White House is left with no choice but to do what it set out to do once again on Tuesday: remind Americans of the strengths of the economy, job growth and the relative health of America’s standing. US compared to some foreign nations.
None of this is likely to succeed, given voters’ dire perception of how tough things really are. But Biden has few other options.
