In a remarkably short period of time, much sooner than virtually all respected forecasters expected, the United States has regained almost all (93 percent) of the jobs lost during the coronavirus pandemic. President Biden on Friday promoted the “fastest decline in unemployment to start a president’s term ever recorded.” Furthermore, wages have risen an impressive 5.6 percent in the last year, allowing Biden to declare that “we are the only country in the world that comes out of crises stronger than when we entered them. That’s what we’re doing here.”
However, not everything is rosy. Wages have increased, but inflation is rising faster. In February, prices were 7.9 percent greater than a year before. That means the vast majority of Americans who never lost their jobs during the pandemic may be in a worse position now than they were before the economy tanked. Combine that with an almost daily reminder that the cost of food, gas, housing and just about everything else has gone up, and it’s easy to see why so many people think the state of the economy is bad despite the creation jobs at a record level.
While Republicans like to blame the $1.9 trillion US Bailout for inflation, that alone hasn’t overheated our $25 trillion economy. If we want to play the blame game, we should start with the Federal Reserve, whose mandate is to control inflation.
It is small consolation that Federal Reserve Chairman Jerome H. Powell admits that he was surprised that inflation was not “transient.” The Federal Reserve implemented a series of extraordinary measures to boost the economy during the pandemic, of which keeping interest rates near zero was just one. It also provided direct loans to state and municipal governments, businesses, and banks; used quantitative easing; and establish a series of credit facilities. As a result, Experts from the Brookings Institution he explains, “by the end of 2021, inflation was well above the Fed’s 2% target and labor markets were approaching the Fed’s ‘peak employment’ target.”
In colloquial terms, the Fed should have removed the punch-bowl long before. Then came the war in the Ukraine, which already made fuel costs rise even more. Biden has a legitimate argument that his spending plan only contributed a small part of the 7.9 percent inflation rate. By an estimatethe plan only increased inflation by 0.35 percentage points.
Politically, however, a president cannot claim to have rescued the economy but bears little responsibility for inflation. Plus, it’s hard to get voters to appreciate what he did. no happen because of your ransom package. Us it did not see prolonged high unemployment. Thousands of businesses were held open. million americans avoided eviction. Millions of children were kept out of poverty. And most schools didn’t stay closed last year.
Biden has gone out of his way to show that he understands that inflation is painful. For a time, he nibbled at the edges, working primarily on supply chain issues. Last week, he marked a turning point, announcing a massive scheme to release 1 million barrels of oil from the Strategic Petroleum Reserve and penalize oil companies that leave leased public lands undeveloped. (The latter will need congressional approval and is unlikely to win the support of Republicans, who remain comfortable with the fossil fuel industry.) If this works to increase supply and reduce fuel costs (along with market-driven increases in platform activity), Biden may get some credit.
Looking at the big picture, Biden’s economic record is extraordinary, but it is clouded by inflation. Whether or not he is responsible for the latter, Biden is unlikely to improve the public’s bad mood until inflation subsides. That’s bad news for Democrats’ chances in the midterms, but if the Fed brings down inflation without pushing the country into a recession, Biden’s economic record may be seen as one of the most successful in history. That’s a big “if”.