Even though there are a few points where this The Hill piece softly slaps the Biden administration, it mostly seems to be taking the position of “well, Los Federales tried, but, you dumb citizens aren’t helping.” Now, if this were happening under Trump, the headline and Blamestorming would be much different, including the headline
The government has tried to stop inflation. Why isn’t it working?
No matter what the federal government does, inflation keeps rising with no clear end in sight.
Consumer prices jumped 1.3 percent higher in June and a whopping 9.1 percent over the past 12 months, according to data released Wednesday by the Labor Department, despite the best efforts of the Biden administration and Federal Reserve to bring inflation down.
While a June surge in gas prices was responsible for much of the overall increase in inflation, prices grew across almost every sector. That’s a troubling sign for the U.S. economy after the federal government scrambled to stop the highest annual inflation in more than four decades from getting worse.
“It’s going to be a long and tough road ahead. This is not going to come down very quickly,” said Derek Tang, co-founder and economist at research firm Monetary Policy Analytics.
After waiving off the threat of inflation for much of 2021, the Biden administration and Fed pivoted sharply toward bringing prices down.
In other words, Biden and his people were ignoring the issues. They weren’t engaged. Manufacturers knew issues were going to happen all the way back in mid-2020. A lot of Asian car manufacturers saw the shipping and cost issues, and moved a lot of the manufacturing to North America. So many who make and sell other products saw the shortages and price increases, and adjusted accordingly. Did you wonder why there really weren’t that many sales when stuff started opening in certain areas in 2020, or for Christmas 2020? Yeah, they projected everything out, because they understand economics, supply chains, etc and so on, things that most in the Biden admin do not. Most haven’t worked in the private sector anytime recently. Biden hasn’t since the early 70’s. So many might know teaching and law, but, not much else.
The Fed began raising its baseline interest rate in March in a bid to slow the economy enough to bring down inflation without causing a severe economic downturn.
But as inflation has steamed ahead, the Fed has hiked rates at an even faster pace. The bank in March boosted rates by 0.25 percentage points, followed by a 0.5 percentage point hike in May and a 0.75 percentage point hike in June — the largest single increase since 1994.
The Fed also ceased its monthly purchases of Treasury and mortgage bonds and will soon allow its holdings to expire, which will pull billions of dollars out of financial markets and into the central bank each month.
That’s literally all the government has done. What has the Biden admin done? The story really doesn’t say. Because there’s not much of consequence to discuss. They really have hurt more than helped.
“There is still a lot of pent-up demand in the economy, especially around leisure, hospitality and tourism, as people appear prepared to run down accumulated savings and pay higher prices to do things they missed out on over the past couple of years,” wrote James Knightley, chief international economist for ING, in a Wednesday analysis.
“To get inflation meaningfully lower quickly we need demand to better match the supply capacity of the economy. Ideally this would come via the supply channel,” Knightley added.
High inflation is often caused by a mismatch between the goods and services that consumers and businesses want to buy and the economy’s ability to supply them.
Demand is normal, has been normal post COVID, and actually dropping because of the lack of goods. There was a short period of demand, especially in the travel sector, but, what we’re seeing now is demand destruction, where people are just not buying a lot of things.
In a Wednesday statement, President Biden dismissed the June inflation report as “out-of-date” given the steady decline of gasoline prices throughout the last month. Even so, those supply shocks are far from settled as long as the war in Ukraine rages on.
Yet, gas is still way, way above where it was when he took office, and it’s still a nationwide average of $4.65, and the higher gas and diesel prices are baked into the cost of goods for months. He has no real idea what’s going on, and doesn’t seem interested in asking those in the private sector who know. And should have asked early in 2021.
Of course, maybe his people wanted this to happen.
Read: The Government Has Tried To Do Something About Inflation Or Something »