Daily Stock Market News

Inside Biden’s frustration with soaring prices

Placeholder while article actions load

President Biden seemed upbeat when he visited an Iowa biofuels plant in April to talk about bringing down gas prices, standing before a large tractor as he declared that “biofuels have a role to play right now” and announced a plan to expand the use of ethanol over the summer.

But privately, Biden dismissed the policy as ineffective and questioned the value of the trip, according to two people familiar with the conversations. After returning to the White House, he hauled his senior staff, including chief of staff Ron Klain, into the Oval Office, badgering them with questions about the purpose of the event.

Biden had worried even before the announcement that it exaggerated ethanol’s ability to cut gas prices and could harm his climate goals, the people said, speaking on the condition of anonymity to discuss private conversations. But Agriculture Secretary Tom Vilsack and other officials urged Biden to go, arguing that it would at least help the Midwest — and the White House, after all, was desperate for ways to lower gas prices.

The episode illustrates the White House’s months-long challenge to dampen rising prices, and the president’s increasing frustration with his administration’s inability to do so. The problem has ballooned over the last year, consuming the president’s top aides and threatening his domestic agenda, his international priorities and his party’s political prospects.

“Inflation is the bane of our existence,” Biden said last week on Jimmy Kimmel’s show.

Klain and other top officials have directed agency heads to look for any and all steps they might take to lower costs for Americans. Biden is increasingly voicing his anger internally. And some Democrats, inside and outside the White House, want to focus on oil and gas company greed as a centerpiece of their fall message.

In a speech Friday at the Port of Los Angeles, Biden renewed an attack on large corporations for ostensibly keeping prices high to boost profits, saying that made him so mad he wanted to “pop” someone. “Exxon made more money than God last year,” Biden said. “Exxon — start investing and start paying your taxes.” Oil companies deny their policies are keeping prices artificially high.

But there is little evidence any of this is working. And some economists say the unusual nature of this inflationary run makes it particularly stubborn.

“I think we’re in a really difficult position, because we don’t have successful precedents for having an economy this red hot in terms of low unemployment and high inflation and not having a recession,” former treasury secretary Larry Summers said. “It’s going to very, very difficult to achieve a soft landing.”

If anything, the problem appears to be accelerating. Prices rose 8.6 percent in May, the highest level in 40 years, according to the latest consumer price index released Friday. Moreover, prices climbed more quickly last month than they did in April, denting the optimism in the White House that the country had already hit its inflationary peak.

Five charts that explain the current inflationary run

Gas prices, the most visible sign of spiking prices, have skyrocketed, with the national average for a gallon of gas hitting $4.99, according to AAA. Russia’s invasion of Ukraine has upended global energy markets, further disrupting supply chains already in disarray because of the pandemic. Western sanctions against Moscow as punishment for the war have also dramatically increased costs.

But Americans are feeling the price hikes across the board: the cost of food, shelter, airfare, medical care and clothing have all increased. And as prices continue to rise, economic head winds are overshadowing and redirecting the president’s agenda on all fronts.

Sen. Joe Manchin III (D-W.Va.) torpedoed the president’s sweeping economic plan in part because of concerns over inflation. The president has changed his approach to Saudi Arabia, a major oil producer, after vowing as a candidate to treat the country as a “pariah.” And his approval rating continues to drop, as voters increasingly sour on his handling of the economy.

A new poll from The Washington Post and George Mason University’s Schar School of Policy and Government found most Americans expect prices will continue to rise in the next year and are changing their spending habits as a result. Republicans continue to seize on the issue as evidence of Democrats’ failed stewardship of the economy, with the congressional elections now less than five months away.

As administration officials increasingly conclude there is little they can do to affect prices, they are at least trying to change their messaging — for example, touting the positive indicators in the economy, chiefly a near-record-low unemployment rate. But as Americans grapple with the rising costs of everyday items, the argument does not seem to be resonating.

The White House made a fresh push last month to show that Biden and his team were hard at work trying to rein in inflation. The president met with Federal Reserve Chairman Jerome Powell in the Oval Office and penned an op-ed in the Wall Street Journal, while the White House sent officials across the cable networks to outline the actions the administration was taking.

Biden and his aides have also taken to attacking Republicans more vigorously, focusing especially on a proposal published by Republican Sen. Rick Scott (R-Fla.) that Democrats argue would make things worse by raising taxes on many Americans.

But the messaging push has not yielded any new direct measures to lower costs.

Jason Furman, a professor at Harvard University and former top economic adviser to President Barack Obama, has long criticized the size of the coronavirus stimulus package Democrats passed at the start of Biden’s tenure, arguing it contributed to inflation.

But he said the administration has largely done what it could to reduce costs since then, although he questioned the prolonged moratorium on student debt repayments and the maintenance of tariffs on China. Restarting student loan payments and taking away some tariffs, Furman argued, could help alleviate the problem.

Furman also said there is a mismatch between the public anger about inflation and how much Biden can do about it. “There is nothing Americans are more mad about than gas prices,” he said. “It’s one of the things the White House has very little power over. It’s a global price, and it’s driven by global events.”

The administration has also struggled to explain how long Americans should expect to see rising prices, giving an inaccurate sense that the rapid price increases would subside relatively quickly. When prices first start increasing markedly last year, Biden and others suggested it was the result of the economy’s rapid reopening after the pandemic and would fade as the economy stabilized.

The price hikes “are expected to be temporary,” Biden said in July 2021, a prediction echoed by top aides who promised inflation would be “transitory.” In recent months, these officials have changed their tune, and late last month, Biden started saying inflation was his “top economic priority.”

Furman said the administration’s early analysis of the problem tracked with most estimates, including the Federal Reserve. They just all happened to be wrong.

“They weren’t ahead of the curve. You can’t look back and say, ‘Wow, that was impressive,’ ” he said. “But you can’t look back and say they were doing a highly political spin operation.”

The renewed engagement with Saudi Arabia is one of the most striking policy consequences of the rising prices, as it marks a notable deviation from Biden’s campaign rhetoric and pledge to put human rights at the center of his foreign policy.

For months, senior officials at the White House and the State Department have debated whether the president should travel to the country, given his sharp criticism of Saudi Arabia for its human rights record, particularly the killing of Washington Post contributing columnist Jamal Khashoggi.

After Russia’s invasion of Ukraine, however, and months-long diplomatic work by Biden officials, the president is set to visit Saudi Arabia later this summer and meet with Mohammed bin Salman, the crown prince and de facto leader of the kingdom.

Officials hope the visit will help bolster oil production and facilitate peace deals in the Middle East, bringing down gas prices in the process.

At the Port of Los Angeles Friday, Biden framed inflation as a sweeping global problem, driven by the persistence of the pandemic and Russia’s ongoing invasion, and he touted his administration’s efforts to improve supply chains.

“Every country in the world is getting a big bite and piece of this inflation — worse than we are in the vast majority of countries around the world,” he said. “But make no mistake about it: I understand inflation is a real challenge to American families.”

But in a statement before the speech, Biden succinctly summarized his immediate and pressing problem: “We must do more — and quickly — to get prices down here in the United States.”

Read More: Inside Biden’s frustration with soaring prices

You might also like