However, the political conversation about inflation is not very good. In fact, it’s largely a camouflage, with enough skill to move around among all the actors involved.
The dramatic allegations put the GOP in a strong position in this fall’s midterm elections. But on the merits, they ignored a lot of conflicting evidence.
The resulting inflation has undoubtedly caused economic pain for millions of households, eroding the purchasing power of high wages. At the same time, they have not been “overwhelmed” enough to prevent them from consuming at a steady rate.
That’s because households in the upper and lower income brackets typically still have more money than they did before the pandemic because of the Covid-19 relief checks; there is still “excess savings” on “household balance sheets,” in the jargon of economists. The unemployment rate has fallen back below 4%.
“Excess savings is enough to cushion the impact of falling real wages on spending, even for low-income households,” said Mark Zandi, chief economist at Moody’s. “The majority of U.S. households are in good financial shape.”
Last year, the Biden White House was not alone in thinking that inflation would be short-lived. The same goes for the Federal Reserve, the government agency responsible for monitoring and controlling inflation through the management of monetary policy.
The role of the media has always been to hold governments accountable. But the unelected and relatively obscure Fed does not hold daily news conferences.
The White House is home to the most high-profile public officials. As a result, journalists keep asking the president about solutions to rising prices, even though no White House has enough power to bring them down in a free-market economy.
The job of the president is to answer questions. For dissatisfied voters, “there’s nothing I can do” won’t solve the problem.
Presidents feel particularly pressure to provide answers for rising oil prices. Voters were particularly outraged by the ever-increasing numbers on signs posted on oil pumps – determined by the supply and demand of oil.
While the inflation debate may be largely false, it is not entirely false. Presidential policies can make inflation worse.
The president can also moderate inflation, if only on the fringes. Efforts by the government to ease price pressures by helping to straighten out supply chains have helped. So is the record release of oil from the Strategic Petroleum Reserve.
He takes over as Fed chairman Jerome Powell, a Trump appointee. In 2011, U.S. President Barack Obama first appointed Powell to the Federal Reserve Board of Directors.
Late last year, Biden decided to keep President Trump in office. On May 12, 80 of the 100 senators — including the vast majority of Republicans and Democrats — voted to confirm the president’s choice.