Washington (AP) —LBJ tried Joeborn. Richard Nixon has issued a presidential edict. The Ford administration has printed a button urging Americans to “inflate now.”
Over the years, the President of the United States has tried, and mostly frustrated, in efforts to quell the economic and political threats of consumer inflation.
Now President Joe Biden is hitting it.
Biden ordered the release of 50 million barrels of oil from the US strategic petroleum reserves on Tuesday in the face of rising gasoline and other consumer prices that plague US households. The move, in collaboration with several other major countries, aims to reduce energy costs. The oil market, which was expecting a move, was not impressed in detail. Oil prices have actually risen in the news.
It was the latest step Biden took to show that he was doing everything he could to combat inflation, especially as gasoline and food prices are increasingly burdening American households. .. On Monday, he announced that Jerome Powell would be reappointed as chairman of the Federal Reserve Board. This is a move to reassure financial markets that Washington is serious about controlling consumer prices. Last month, he announced a contract to ease the supply backlog at the Port of Los Angeles by extending operations at the Port of Los Angeles 24 hours a day, 7 days a week.
Still, none of the president’s actions are considered likely to soon make a meaningful dent in rising prices.
Mark Zandi, Chief Economist at Moody’s Analytics, said: “What he is doing is positive and they have no downsides … but they are at their limits. They will not move the dial too much.”
Inflation has always been a tough enemy, further complicated by the extraordinary recovery from the pandemic recession, and the shortage of supplies and workers and transportation bottlenecks are pushing up prices.
What are the consumer prices?
The government’s consumer price index soared 6.2% in the 12 months to October. This is the sharp rise since 1990.
Sarah Binder, a political scientist at George Washington University who studies the Federal Reserve Board (FRB), said after nearly 40 years of stable prices, CPI News said, “Inflation rises once in a generation. “. “The problem is pretty serious because it’s something voters are aware of. Whether you buy milk or gas, it’s hard to escape the impact of a surge in inflation on your daily life,” he said.
According to AAA, the average price of regular gasoline has skyrocketed from $ 2.11 a year ago to $ 3.40 per gallon.
Exacerbating pain, increasing pressure on Biden, and inflation outpacing Americans. Adjusting for price increases, last month’s average hourly wage actually fell 1.2% year-on-year.
“Inflation is painful and always political,” said Dyan Wonck, chief economist at Grant Thornton, an accounting and consulting firm.
What’s behind the price spikes?
It’s partly a very good news result. The world economy, especially the United States, has recovered at an unexpected speed and power from last year’s short but severe recession. It was the result of ultra-low interest rates, huge government spending, and ultimately the widespread deployment of vaccines that allowed more economies to resume.
The speed of the rebound surprised the company. A year and a half ago, they were prepared for the worst — they fired workers, stripped shelves and warehouses, reduced investment and factory production.
And the energy company did the same. Oil and gas production was reduced as demand for transportation fuel plummeted. When demand surged, they weren’t ready. They called the workers back and found that they were struggling to buy enough to fill the customer’s order. The port and cargo yard could not handle the traffic. Countries competed for the shipping of expensive liquefied natural gas. Due to the regular outbreak of COVID-19, Asian ports and factories were closed. The global supply chain has collapsed.
As costs have risen, many have found that they can shift the burden to consumers in the form of higher prices. During that time, many families deposited government relief checks in banks and accumulated their savings. Some critics also blamed Biden’s $ 1.9 trillion emergency aid package for overheating the economy and contributing to inflationary pressures.
Economists are divided on how long inflation will continue to skyrocket. Gus Faucher, Chief Economist at PNC Financial, predicts that inflationary pressures will ease as the supply chain is reorganized.
“We expect inflation to slow in 2022,” he said.
What can the president do?
The White House has limited tools to reverse higher prices. Because its mission belongs to the Fed, the Fed can raise borrowing costs to cool the sizzling economy. However, in the 1960s and 1970s, inflation became a serious political threat and pressured him to do something about it.
President Lyndon Johnson sought to persuade companies to raise prices and quit trade unions to limit wage demands. This is a practice known as “Jovon”. When Bethlehem Steel raised steel prices in 1965, Johnson criticized its executives for being unpatriotic, and they retreated, according to Robert Samuelson’s book Great Inflation and Its Aftermath. When egg prices rose in 1966, Johnson ordered the American Surgeon General to emphasize the health hazards of cholesterol in eggs in order to reduce egg sales and thus prices.
Nixon imposed wage and price controls in 1971 and 1973, which temporarily curbed inflation, but when the controls were lifted, prices soared.
Gerald Ford’s “Whip Inflation Now” program encouraged Americans to grow their own vegetables, reduce food waste, and reduce consumption. Americans responded primarily by mocking the program. Some even turned the president’s WIN button upside down. He explained that the resulting NIM stands for “no immediate miracle.”
What did Biden do?
Biden signed a $ 1 trillion public works program last week. The program could fund road, bridge and port repairs and mitigate the supply chain backlog that contributed to price increases. Eliminating transportation bottlenecks is doubly helpful. It eases inflationary pressures and boosts the economy by increasing the flow of goods to customers.
Last week, Biden sent a letter to the Federal Trade Commission asking the FTC chair to consider investigating whether rising gasoline prices were the result of “illegal activity.” The White House is also to strengthen antitrust enforcement in the meat industry, intensify competition and lower meat prices.
His decision to re-designate Powell to lead the Federal Reserve, in part, meant reassuring the financial markets of Washington’s determination to keep consumer prices out of his control. bottom. Lael Brainard, a member of the Federal Reserve Board, was another strong candidate for the job and was perceived to be less mean to inflation.
Why did Biden tap the Strategic Petroleum Stockpiling Tuesday?
The idea was that the more oil we put on the market, the lower the price. It’s not happening. But depending on what’s happening in other parts of the world, it’s still possible that it will work.
US oil reserves hold approximately 605 million barrels of oil in underground caves in Texas and Louisiana. Designed in the 1970s in response to the Arab oil embargo to store oil in the event of a supply disruption or emergency. However, the dynamics of the global oil industry have changed dramatically in recent years, with the United States now exporting more oil than it imports.
The 50 million barrels that Biden promised to release could slowly sell at a rate of about 1 million barrels per day. This means that the influx of new oil can last for about two months. Jim Burkhard of IHS Markit said adding a small amount of oil to the market could turn it into the black and lower prices.
“Immediate price reaction is not the final decision on the effectiveness of this effort,” he added. “It will really be a few months away.”
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Bussewitz reported from New York.
AP Economics writer Martin Crutsinger contributed to this report.
Biden aims to do what the president often cannot do. WGN Radio 720
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