WASHINGTON — President Biden was at a private meeting this year on student debt forgiveness when, as uncomfortably often happens today, the talk turned back to inflation.
“He said in everything he does that Republicans will attack him and start using the word ‘inflation,'” said California Democrat Tony Cárdenas, referring to Biden’s meeting with the Congressional Hispanic Caucus in April. Mr Cárdenas said Mr Biden was aware he would be attacked for rising prices “no matter what problem we are talking about.”
The comment underlined how today’s rapid price increases, the fastest since the 1980s, constitute a blatant political liability that looms with every major policy decision the White House makes — leaving Mr. Biden and his colleagues on the defensive as officials discover there are not a good way to talk to voters about inflation.
The government has at times been splintered internally about how price increases should be discussed and has revised its inflation-related message several times as the talking points fail to resonate and new data comes in. Some Democrats in Congress have urged the White House to take a different — and more proactive — tone ahead of November’s midterm elections.
But the reality facing the White House is a harsh one: There’s little politicians can do to push price hikes through quickly. Federal Reserve policy is the country’s main solution to inflation, but the central bank is tempering price increases by making money more expensive to borrow to cool demand, a slow and potentially painful process for the economy.
“For a president, inflation is hell’s problem — you can’t win,” said Elaine Kamarck, a senior fellow at the Brookings Institution and the founding director of the Center for Effective Public Management. “Because it’s so difficult economically and politically, it’s even worse: you can’t do anything in the short term to solve it.”
Consumer prices rose 8.3 percent in the year through April, and data on Friday showed inflation of 8.6 percent in May. Inflation rose an average of 1.6 percent per year in the five years prior to the pandemic, making the pace of the current rise painfully high by comparison. A gallon of gas, one of the most tangible household costs, hit a national average of $4.99 this week. Consumer confidence has plummeted as families pay more for everyday purchases and as the Fed raises interest rates to cool the economy, increasing the risk of a recession.
The White House has long realized that soaring prices are pushing Mr. Biden could lower, and that risk was telegraphed in a series of confidential memos sent to Mr. Biden were sent by one of his key pollsters, John Anzalone. Inflation has only fueled voter frustration, according to a separate memo released last month by Mr. Anzalone was drafted, showing that the president has a low appreciation of the economy, rivaling only his approach to immigration.
“Economic sentiment among the public remains poor, with most concerns about both inflation and the possibility of a recession in the coming months,” the May 20 memo said. The information was sent to “interested parties” and it was not clear whether the White House had received or reviewed the memo.
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The poll data shows that about eight in 10 Americans “view the national economy as in bad shape” and that “concerns are high about the potential for an economic recession in the near future.”
The economic concerns were echoed by members of Congress, leading academics and pop culture flag bearers. “When do you all think they’re going to announce we’re going into a recession?” Cardi B, the Grammy-winning rapper, wrote in a tweet which went viral this weekend.
The White House knows it’s in a tricky position, and the way the government explains inflation has evolved over time. Officials spent the early stages of the current price eruption and largely described the price pressures as temporary.
When it became clear that rising costs were here to stay, government officials began to disagree internally about how to frame that phenomenon. While it was clear that much of the upward pressure on prices came from supply chain shortages exacerbated by ongoing waves of the coronavirus, some of it was also attributable to strong consumer demand. That large spending was made possible in part by government stimulus packages, which included direct checks on households, comprehensive unemployment insurance and other benefits.
Some White House economists have begun to emphasize that inflation was a trade off: To the extent that Mr. Biden’s stimulus spending fueled inflation, it also helped economic growth and a faster recovery.
“Inflation is definitely an issue and it’s critical to address it,” Treasury Secretary Janet L. Yellen recently told members of Congress. “But I think at the same time, I think we need to recognize how successful that plan was in leading to an economy where instead of a large number of workers who absolutely cannot find a job, the exact opposite is true.”
But the president’s more political aides tend to strongly minimize that the March 2021 package known as the US bailout boosted inflation, even as they took credit for strong economic growth.
“Some have a curious obsession with the exaggerated impact of the bailout while ignoring the extent of high inflation worldwide,” said Gene Sperling, a senior White House adviser who oversees the implementation of the stimulus package. wrote on Twitter last week, adding that the law has had “a very marginal impact on inflation”.
Brian Deese, the director of the National Economic Council, admitted in an interview last week that there were some differences of opinion among White House economic officials when it came to how to talk about and respond to inflation, but he painted that as positive. – and as something that does not lead to any kind of dysfunction.
“If there wasn’t healthy disagreement, no debate and people feel comfortable bringing issues and ideas to the table, I don’t think we would be serving the president and the public interest well,” he said.
He also pushed back the idea that the government was deeply divided over the aftereffects of the March 2021 package, saying in a separate emailed comment that “the government agrees that many factors contributed to inflation, and that inflation has been caused by increased demand. and limited supply around the world.”
How to display the Biden administration’s stimulus spending is far from the only challenge facing the White House. As the price hikes continue, Democrats have struggled with how to discuss their plans to fight them.
The president and his key political associates have brought up a few key topics of discussion, including blaming President Vladimir V. Putin’s invasion of Ukraine for what Biden calls the “Putin price hike,” pointing to deficit reduction. as a way to lower inflation and arguing that Republicans have a bad plan to deal with rising costs. Mr. Biden regularly acknowledges the pain that higher prices cause and has emphasized that the problem of taming inflation rests largely with the Fed, an independent entity whose work he has promised not to interfere.
The government has also stressed that inflation is rife worldwide and that the United States is better off than many other countries.
The renewed coverage comes as Mr. Biden and his top officials become increasingly concerned about the public’s negative views of the economy, according to a government official. Economists within the administration have been sidelined more when it comes to setting the tone on things like inflation than in past White Houses, said another person familiar with the discussions.
So far, the topics of discussion have done little to change public perception or assuage concerns on Capitol Hill, where some Democrats are pushing for the White House to find a more compelling story.
“There needs to be more laser focus on the economy, a bolder message, a clearer story,” said Representative Ro Khanna, a California Democrat who wrote a New York Times op-ed last week saying Democrats need a more ambitious plan for inflation. to fight. He added that “rhetoric about ‘Well, we’re doing really well’ does not reflect the deep sense of dread that Americans feel.”
Part of the difficulty is that politicians can do only so much to counteract price increases.
The White House has taken steps to mitigate the impact of inflation or to help supply catch up with demand. It has released strategic petroleum reserves to slow gas price increases and, for example, to unclog ports.
Most tweaks only help on the edges. Yet inflation plays a role in the discussion of every decision the White House makes.
This spring, Biden lifted a summer ban on sales of higher-ethanol gasoline blends to try to stem price hikes at the pump, sparking frustration among climate activists who were still angry over the collapse of the climate and social spending package. from the president.
Talks about rolling back Trump-era tariffs on Chinese goods have also gotten tangled up in inflationary law. Ms. Yellen has said she favors easing tariffs to help lower prices, but other Democrats are wary that scrapping it would make Biden a soft spot for China.
Inflation is also affecting talks about whether or not to cancel student loan debt, one of Mr. Biden. Economists in the government think that at the most, loan forgiveness would push inflation up a bit by giving people with outstanding student debt more financial leeway. But some economists in government orbit have expressed concern about the possibility of doing anything that could boost demand — even a little — at a time when it’s already warm.
To dampen the inflationary effect, forgiveness would most likely be accompanied by a resumption of interest payments on all student loans that have been discontinued since the pandemic.
For now, the government is considering forgiving at least $10,000 to borrowers in a certain income range, according to people familiar with the case. Mr. Cárdenas said Mr. Biden knew he would be attacked for inflation, but he didn’t think the issue would stop the president from canceling at least $10,000 in debt.
“Will it influence him to continue? It can,” he said.
Jonathan Martin reporting contributed.
