Inflation isn't Biden's biggest problem right now

A shopper walks past turkeys displayed for sale in a grocery store ahead of the Thanksgiving holiday in Los Angeles earlier in the month. AFP

US President Joe Biden remains mired in alarmingly low poll numbers, with the latest figures showing about 43 per cent approval of his performance compared to 52 per cent disapproval. In addition to the cyclical, historical patterns of US politics that I recently outlined in these pages and which are obviously a major factor, most observers on all sides point to two primary, and closely related, issues at play: the economy and the pandemic.

For many Democrats, this unpopularity makes little sense. On the economy, they argue that the media is fixated on negative stories involving inflation while ignoring the roaring comeback on many other fronts. They have a powerful case.

More than 5.5 million jobs were created in the past 10 months, leading to the lowest unemployment figures in 52 years. And while gross domestic product growth sagged a bit this summer, it's now anticipated to run between 5-7 per cent in the last quarter of 2021.

Stock market values have soared. And while there is a tight labour market, that has resulted in a significant strengthening of bargaining power for many workers, whether individually or collectively.

Yet, ongoing inflation carries a powerful negative political punch. The October rate of 6.2 per cent was among the highest in recent memory and slightly exceeded already gloomy forecasts. Whenever inflation is outpacing growth in spending power and wage increases, there is bound to be political blowback.

The Democrats offer both a sophisticated and a ridiculous response to such criticism.

The serious response, which tends to be made more quietly and aimed at better-informed audiences, holds that by allowing the economy to, in effect, overheat somewhat in favour of greatly revived consumer demand, the administration and the Federal Reserve Board have erred in favour of job creation and economic growth at the expense of higher inflation.

The core argument is that both the economy and ordinary people would be far worse off with an unemployment crisis than rising but manageable inflation and a labour shortfall. That's probably true, but it doesn't play well, or even really register, on main streets.

The second argument, usually spouted on television, is that corporate greed is responsible. This is ludicrous, though it may appeal to the anti-big business sentiment of many Democrats and even some populist Republicans.

Corporate profits are up, they say, therefore there must be gouging. But when demand for many goods and services cratered during the lowest points of the pandemic, most corporate profits similarly tanked. Now that demand is back up, predictably so too are profits.

This resurgent demand is helping to fuel inflation, as ongoing supply-chain bottlenecks continue to make many high-tech goods, especially those requiring computer chips, scarce and pricey. Higher wages due to the extremely tight labour market add additional inflationary pressure.

Cargo containers sit stacked on a ship in Bayonne, New Jersey, earlier in the week. As surging inflation and supply chain disruptions are disrupting global economic recovery. AFP

Across the economy generally, demand is overwhelming supply, and therefore, inevitably, prices are going up.

Not only is this not Mr Biden's fault, his relative success in managing the pandemic has actually contributed to a strong recovery that made significant inflation virtually inevitable.

In their quest to shift blame, Democrats are especially targeting the oil and gas industry, because rising petrol prices are the most obvious signs of inflation that Americans see in giant numbers on huge signs everywhere, every day.

The administration is reduced to investigating the oil industry for supposed malfeasance and collusion, despite the emergence of a global energy crunch based on the very same dynamic of resurgent demand confronting reduced supplies.

Mr Biden is even releasing 50 million barrels of crude oil from the strategic petroleum reserve, which will account for one day's supply in the global market, and therefore probably won't even dent prices at the pump. But, hey, we tried.

Thus far, the administration and the Fed are resisting calls to raise interest rates to keep the roaring recovery going and prioritise jobs and growth over inflation. Depending on coming trends, they may have to revisit this judgment, possibly quickly.

US President Joe Biden with US Secretary of the Treasury Janet Yellen. EPA

Harping on inflation is good politics for Republicans, and apparently has an inordinate appeal to much of the media. But there's definitely a good news story Democrats could tell if they decided to get serious and disciplined about messaging.

The other major Republican attack on Mr Biden is truly topsy-turvy. Their main talking point in recent days is that he campaigned as the man who would, single-handedly, defeat the coronavirus (though he never said anything like that) but since it continues to plague much of the country, he failed, which accounts for his low approval ratings.

In fact, from ubiquitous new vaccines to new treatments, and effective wide-ranging mandates, the Biden administration has performed well.

One of the primary reasons the pandemic continues to rage in much of the country is that many Republicans have systematically discouraged Americans from getting vaccinated or masking and other mitigation, blocked or banned mandates, and much of the party has spread wild disinformation about this deadly disease.

Texas Governor Greg Abbott and Samsung Electronics Vice Chairman Kim Ki-nam attend a press conference in Austin, Texas, last week. Abbott has loosened pandemic restrictions in the state. EPA

By dismissing inflation, the Democrats are doing themselves no favours

Yet, Mr Biden's significant, if badly hampered, successes on containing the pandemic have come at the price of a virtually inevitable surge in inflation given renewed demand and have fuelled paranoid Republican culture war talking points.

Though there is ongoing bad news on both, Mr Biden doesn't really have either an inflationary or economic crisis or an out-of-control pandemic at present. But he plainly has a serious messaging crisis.

Far too many Americans do not realise or register how much improvement has occurred in 2021, despite the wide-open Thanksgiving holiday last week in stark contrast to last year's lockdown non-feast.

Yet, by dismissing inflation, first as imaginary and more recently as the function of "corporate greed", the administration and the Democrats more broadly are doing themselves no favours. They need to be much more honest with the public about real inflationary pressures and the defensible, logical choices they've made.

They should certainly take a cue from former president Donald Trump, whose hyperbolic grandiosity was as effective as it was repulsive. Though they need not replicate his pathological dishonesty, they could learn a thing or two about politically useful boasting about their actual successes from the man Mr Biden derisively dismisses as "The Former Guy".