Date: 2026-01-17 Page is: DBtxt003.php txt00021376
US Economy
Inflation
The Memo: Inflation delivers gut-punch as Biden tries to sell economic record
<br> </div> <hr> <a href= https://thehill.com/homenews/the-memo/585403-the-memo-inflation-delivers-gut-punch-as-biden-tries-to-sell-economic target = _blank > Original article: https://thehill.com/homenews/the-memo/585403-the-memo-inflation-delivers-gut-punch-as-biden-tries-to-sell-economic </a> <hr> Burgess COMMENTARY<br> Most reporters do not seem to have a decent perspective on what constitutes dangerous levels of inflation nor indeed the essential characteristices of inflation. I studied engineering and economics at Cambridge at the end of the 1950s. I was working as a young corporate executive in the 1970s when the global OPEC oil shock changed the fundamentals of the world economy. This created an economic crisis of 'cost push' inflation everywhere except the major oil exporting countries. Because energy is a major cost in almost everything that is produced as well as in transportation and running buildings ... the cost of everything goes up. Inflation is measured by looking at prices. If cost go up and prices stay the same, then profits are going to decline, and in the 1970s profits crashed, quickly followed by stock markets. <br> It was not until the 1980s that the profit problem started to get solved. It involved the massive movement of American production (and to a considerable extent European production as well) to low wage countries mainly in the Far East. In the 1980s and 90s Japan was a beneficiary of this outsourcing, and then later South Korea, China and others in the region. This solved the profit problem that had been faced by American business, but created a massive problem for American workers who faced substantial economic challenges and little in the way of a social safety net to help. <br> The inflation that is happening in 2021 is very different from the inflation that was an economic crisis in the 1970s. The amount of profit that is embedded as a cost in almost every product or service that is consumed in the USA is huge, and there have been major efforts during the Covid-19 pandemic to help business survuve. Though much of this help was meant to help small business, a big part of the available funds were utilised by big companies with expertise in negotiating governmenbt largesse. It is difficult to understand how stock markets in the USA can be at record levels, but many companies are achieving good profits in spite of everything and looking to good times ahead which is some of the explanation. Some of the explanation is also that the economy is going to get inflation because companies are seeing opportunity to raise prices and are doing so as fast as they can. The inflation could stop instantly if excess profit could be squeazed out of consumer prices. <br><i> Peter Burgess </i> <hr> </td></tr><tr><td width = 100% valign = top > </font><FONT SIZE = 5 color = black font face = 'Times New Roman '> <b>The Memo: Inflation delivers gut-punch as Biden tries to sell economic record</b> <br><br> BY NIALL STANAGE - <br><br> 12/11/21 12:34 PM EST 2,336 <br><br> The White House is seeking credit for the better parts of the economy this week — but President Biden’s efforts to write a more positive script have been stymied by inflation. <br><br> Inflation for November came in at 6.8 percent year-on-year in data released Friday, surpassing October’s read of 6.2 percent. Both of those figures were, at the time of their release, the highest inflation numbers in a generation. <br><br> However, the White House argues that the dominant media narrative, focused on economic malaise, is too pessimistic. <br><br> Biden’s aides would much prefer to focus on the robust job growth the nation has enjoyed during the president’s first 11 months in office. <br><br> Unemployment for November stood at just 4.2 percent — down from a pandemic high of 14.8 percent in April 2020 and 6.3 percent in January of this year. There were fewer new jobless claims in the most recent weekly data than at any time since 1969. <br><br> National Economic Council director Brian Deese and White House chief of staff Ron Klain have led the effort to cast the administration’s economic record in a more positive light. <br><br> Deese joined White House press secretary Jen Psaki for a briefing Thursday with a raft of charts aimed at showing the strength of the economic recovery — and to suggest that gas prices, a persistent sore point in recent months, have begun to come down. <br><br> Klain, in a video released on Twitter the same day, pointed out Biden had created more jobs during his first year than any president in history — some six million. <br><br> Klain also noted that the number of Americans on the unemployment roll was a fraction of what it had been, at just over two million compared to 21 million. <br><br> Highlighting other factors including increasing retail sales, the chief of staff claimed to see “an economy that’s humming.” <br><br> In some ways, though, it is humming at too high a pitch. One factor causing the spike in inflation is a clog in the supply chain. The primary cause of that problem is Americans buying an enormous number of goods while spending on services such as entertainment and dining has remained muted. <br><br> The tight job market has given workers much greater leverage than before — a welcome change for many people after years of de facto wage stagnation. But pay raises can serve as fuel piled on the inflationary fire. <br><br> Politically speaking, one key problem for Biden is that high inflation affects Americans directly and across the board. A strong job market is only a boon to someone looking for a new job. A rising stock market only lifts the fortunes of people invested in it. But rising prices hit everyone, and in a very immediate way. <br><br> Biden, who prizes his own middle-class roots and capacity for empathy, acknowledged the visceral impact of the fast-rising prices in Friday afternoon remarks at the White House. <blockquote><i> “It’s s real bump in the road. It does affect families,” the president said. “When you walk into the grocery store and you’re paying more for whatever you’re purchasing, it matters.” </li></blockquote> The headwinds Biden faces are exacerbated by the fact that millions of Americans are experiencing problematic inflation for the first time in their lives. <br><br> The last time inflation was close to its current level, the late President George H.W Bush was in office. Before that, the modern commander-in-chief most synonymous with inflation was President Carter in the late 1970s. <br><br> Inauspiciously for Biden, both Bush and Carter lost their bids for reelection. <br><br> Biden’s position is not nearly as dire — yet. <br><br> Federal Reserve Chairman Jerome Powell recently told Congress that it was time to retire the word “transitory” to describe inflation. But there are still hopes at the Fed and at the White House that inflation will ease by the spring as the supply chain bottlenecks loosen. <br><br> Still, even the current situation threatens to significantly complicate Biden’s legislative agenda, in particular the unresolved battle to pass his massive Build Back Better plan. <br><br> Republicans have cast the idea of a $1.9 trillion bill in the current climate as profligate, and likely to stoke inflation anew. <br><br> The White House, including Biden himself, has been seeking to rebut that argument, asserting that the plan’s investments in physical and human infrastructure will actually ease inflationary pressures in the longer term by boosting economic capacity. <br><br> “I think if you look at what most people, most of the economists are saying, this Build Back Better bill is not going to increase inflation,” Biden said Friday. “It will diminish inflation. It has a negative impact on inflation. It doesn’t raise inflation, but that’s hard for people to think about right now.” <br><br> <br><br> He got the last part right, at least. <br><br> While inflation remains so high, it drowns out the story the White House would prefer to tell. <br><br> The Memo is a reported column by Niall Stanage. <br><br> TAGS JOE BIDEN JEROME POWELL BRIAN DEESE JEN PSAKI RON KLAIN THE MEMO INFLATION JOBS REPORT UNEMPLOYMENT SUPPLY CHAIN ISSUES BIDEN ECONOMIC AGENDA <br><br> <ul> <li>On The Money — Inflation hits nearly 40-year high</li> <li>Biden talks vaccines, polling in first late night show appearance as...</li> </ul> <!-- Just In... 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