Entrenched US inflation becomes a tough problem for Biden

Illustration: Chen Xia/Global Times

To prevent his approval ratings among US voters from cratered, US President Joe Biden will travel to Saudi Arabia to persuade Riyadh to pump in more crude oil and bring down high inflation in the US, according to a report by the New York Times. The White House said now is the time to reconnect with Riyadh, as the United States has “significant intertwined interests with Saudi Arabia,” a country Biden once considered a “pariah.”

If it hadn’t been for the ever-rising inflation – which has increasingly become an ingrained disease harming the US economic system, the Biden administration would not have lowered its “imperial head” before Riyadh.

Also to help mitigate rising prices, a growing number of American newspaper columnists, including the Washington Post and the Wall Street Journal, are calling on the White House to end Trump’s trade war with China and eliminate tariffs imposed on Chinese imports, because the tariffs have proven to be a form of punitive taxation for tens of millions of American households. When the Biden administration will complete its review of Trump’s tariffs and make the decision to remove them is not yet known. One uncertainty correlates with so-called China hawks in Washington who stubbornly believe that China is a strategic adversary of the United States.

And the Biden administration should continue to crack down on Russia, imposing unprecedented economic sanctions on Moscow, although the sanctions have created self-inflicted acute pain in the United States and the West, by disrupting the global supply chain. into crucial fuel, major raw materials and foodstuffs, driving up inflation around the world.

Biden last week told American voters that controlling inflation was his “top national priority” as the rising cost of living has become a major political issue as the United States prepares for the election. midterms in Congress in November — which Biden and his fellow Democrats fear will lose. to their Republican adversaries. If history is any guide when Americans struggle to afford the necessities, including food, fuel and shelter, they are more likely to vote against the incumbent political party.

According to opinion polls, public support for Biden to manage the US economy has plunged with the steadily rising cost of living.

Inflation in April rose 8.3% from a year earlier, close to the 40-year high reached in March. Food prices increased by 9.4% compared to the previous year. An index for meat, poultry, fish and eggs rose 14.3%, the biggest annual increase since 1979. And energy prices were 30.3% higher than 12 months earlier, more than three times the rate of global inflation. Last week, a poll found that more than 70% of Americans believe the US economy is “worsening” and 78% are dissatisfied with the direction the country is heading.

Price hikes have overtaken the coronavirus pandemic as the most discussed kitchen table topic in the United States. Inflation is a regressive tax that disproportionately hits low-income groups and pensioners. A $10,000 deposit in 2021 is now only worth around $9,300, and next year it could be worth less than $9,000 – a crystallizing example of the eroding effect of inflation.

So who is to blame? Economists close to Biden and Democrats blame inflation on Russia, alleging that the conflict in Ukraine and subsequent Western sanctions against Moscow have caused oil and natural gas prices to spike. Some blame pandemic-induced global supply chain disruptions.

But the root cause lies with the Biden administration.

In May 2021, several weeks after Biden signed the $1.9 trillion pandemic rescue spending bill, I wrote an essay for the Global Times titled “Biden’s Fiscal Largesse Will Cause inflation and cause the bubble to implode? In the essay, I said that Biden’s fiscal stimulus, or American Rescue Plan (ARP), would likely open Pandora’s box. “In essence, budget spending is inflationary, which is even more the case, coupled with the extraordinary loose monetary policy of the Federal Reserve,” I wrote, placing the cause of inflation on the Biden administration and the US central bank. I predicted that “it won’t be long – late 2021 or early 2022 – before the Federal Reserve is forced to act” by reversing an overly accommodative monetary policy and raising interest rates.

For much of 2021, the White House, in tandem with the Federal Reserve, had stated that “no one is suggesting that there is runaway inflation on the way, no serious economist” and that “inflation will only be transitory. “.

But it will endure, becoming an underlying irritant clouding the broader US economy.

Domestic US shortages of manufactured goods are unlikely to improve as the Biden administration continues to disrupt free trade, impose sanctions on US trading partners and erect higher barriers to the export of technology, to serve its misguided attempt at de-globalization. The pandemic continues in the United States, permanently stretching the workforce as America’s baby boomers retire, which will limit the number of Americans available for businesses to hire and steadily increase labor costs. wages. In addition, skyrocketing rental costs will continue due to the shortage of affordable housing in the United States.

With these underlying structural issues, US inflation is unlikely to subside in the near term unless the Federal Reserve takes drastic action by rapidly raising interest rates, which threatens to drive the economy to a painful and prolonged hard landing.

The author is an editor at the Global Times. [email protected]

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