Inflation challenges Biden's economic recovery plan

The highest inflation in three decades is posing a new challenge for US President Joe Biden as he passes a $2 trillion spending package.

The US Department of Labor on November 10 said the country's consumer price index in October increased by 6.2% over the same period in 2020. This is the fifth consecutive month that inflation has exceeded 5%, when prices skyrocketed with items from cars, gasoline to groceries, furniture.

Inflation sparked fresh Republican criticism of President Joe Biden's $2 trillion climate and social spending plan. House Democrats are finalizing the bill next week and sending it to the Senate.

In response, Biden disagreed with the criticism, although he acknowledged that he still prioritized reducing challenges related to inflation and supply chains. He said the infrastructure bill would help ease traffic congestion and his $2 trillion "Build Better" plan aims to help families cut costs.

US President Joe Biden. Photo: Bloomberg

"Consumer prices are still too high," Biden said on November 10 during a visit to the Port of Baltimore. "Everything from a gallon of gas to a loaf of bread is more expensive," he added. However, Biden also sought to balance out positive economic news like rising wages and falling unemployment.

The Biden administration is also looking for other ways to stabilize the supply chain. The White House will outline a new program this week. Under it, struggling ports could receive money directly from other federally funded projects to ease congestion. For example, the Port of Savannah (Georgia) was reallocated over $8 million to open five temporary inland container yards.

Republicans have unanimously rejected the Democratic spending plan and the taxes that go with it. They say the new spending plan is unwise. "This inflation is real, not temporary. It's huge and created by the terrible economic policies of the Biden administration," said Sen. Kevin Cramer.

The $2 trillion spending plan provides for free childcare and preschool, along with provisions to reduce prescription drug prices. Democrats plan to pass the bill without Republican support, thanks to a process known as budget adjustments.

This way, they only need half the Senate to approve, instead of 60%. In it, Vice President Kamala Harris will break all constraints of the Senate so that the bill can be enacted.

Democratic Senator Joe Manchin of West Virginia, expressed concern about the size of the new $2 trillion package. The reason is that the $1.9 trillion bailout package issued earlier this year helped push up inflation as household incomes rose. On November 10, he reiterated concerns about rising prices and dismissed previous claims by the administration that high inflation was temporary.

"All things considered, the threat posed by record inflation to the American people is not temporary. Instead, it is getting worse. From the grocery store to the gas station. Americans know inflation is real and the government can no longer ignore the difficulties people feel every day," he said.

Moody's Analytics estimates an infrastructure spending package of about $1 trillion, including $550 billion in new spending, along with $2 trillion in social spending and the climate bill, would add about 0.3 percentage points. inflation in the period 2022 - 2024.

Republicans are targeting inflation ahead of next year's midterm elections. "Voters will blame Democrats for causing this inflationary crisis. They've created overspending and the inability to manage the nation's supply chains," said Mike Berg, a senior fellow. Republican spokesman said.

In response, White House spokesman Andrew Bates cited the endorsement of 17 Nobel laureates in economics for Biden's recovery plan. This group of experts believes that the president's proposals will ease long-term inflation pressures. Bates also criticized the 2017 tax cuts passed by Republicans as gifts for the rich.

The White House points out that polls show that people support the administration's economic agenda. They hope the passage of the infrastructure bill will help restore the declining popularity of the public with President Biden.

A Monmouth University survey released on November 10 found that 65% of Americans support the infrastructure bill and 62% support a Democratic spending plan for other priorities. The same poll found that 42% of Americans approve of Biden's job performance, while 50% disapprove.

Patrick Murray, Polling Director at Monmouth University, said the results showed the White House and congressional Democrats were "lacking a specific and cohesive message" about how their plans would help. American.

Persistent inflation is also complicating the US Federal Reserve's (Fed) strategy of gradually withdrawing policies to support the economy enacted at the beginning of the pandemic. It also complicates speculation about who will lead the Fed next term. Biden has not yet said who will hold the Fed chair after Chairman Jerome Powell's term ends in February 2022.

Former Treasury Secretary Larry Summers criticized the administration's assessment that the price hike was temporary. Earlier this year, he warned of the risk of inflation from the $1.9 trillion Covid-19 aid bill of the Democratic Party.

However, he said he was not concerned that the $2 trillion "Build Better" package would generate similar inflation. Because, this package is disbursed for 10 years and will be offset by tax increase. According to him, not passing this package would be a mistake.

"The probability that prices will rise or fall over the next few years is about the same. The decision on this next bill should be based on whether you think that spending is a reasonable investment in the future of the country. ", he said.

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