Biden and the Inflation Trap

Today on TAP: Can the president be even more effective in countering the Republicans’ false narrative?

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Consumer prices rose at an annual rate of 8.3 percent in April, according to the Bureau of Labor Statistics report, slowing a bit from the March rate of 8.5 percent. Energy prices increased by 30 percent; food costs rose 9.4 percent, the highest annual rate in four decades.

As I suggested in yesterday’s column, one villain of the piece was price-gouging by the airlines. Airfares increased at an annual rate of 33.3 percent. Only a small fraction of this was more costly aviation fuel. Most was the result of airlines holding back capacity to drive up fares.

Biden gave a major speech on the economy yesterday. The speech was one part explainer—what’s really behind inflation—and one part belated partisanship: Democrats actually have a serious strategy for moderating inflation and Republicans don’t.

More from Robert Kuttner

He scored a few good punches when he discussed Democrats’ proposals for putting more money in people’s pockets, such as giving Medicare the power to negotiate the same drug discounts that the VA negotiates. In his previous May 4 speech, he whacked the plan of Sen. Rick Scott of Florida, chair of the National Republican Senatorial Committee, to reduce the deficit by sticking middle-class families with a tax hike averaging $1,400. (Unfortunately, that speech bragged about the Democrats’ deficit reduction in the current recovery, lending credence to the wrong litmus test.)

Overall, I’d give Biden’s recent speeches on the economy a B-plus. His task is far from enviable. The sources of inflation are complex; and despite Larry Summers, most of the cause is not excessive stimulus of the economy. As Biden explained, inflation is mainly the result of the COVID-driven supply chain shock and its reverberations, compounded by the supply effects of Russia’s invasion of Ukraine.

But a key source of price hikes not emphasized by the president is sheer opportunistic price-gouging, as in the airline industry. Here, Biden’s tone and policies are disappointingly mild. Biden said:

I’ve often said that capitalism without competition isn’t capitalism, it’s exploitation. So, we’re promoting competition for everything from Internet services to meat processing.

We basically have four meat processors in the whole country. They process the meat that goes into the hamburgers you buy, so they set the price. When there’s no competition, they can set the price higher and higher. So, we’re helping smaller companies get into the game to compete and help bring down the overall prices.

Great, but what about naming and shaming the giant meat processors? What about the underutilized powers of federal agencies from the Department of Transportation to HHS to go after price-gouging? If Biden is going to be credible on inflation, he needs to be more of a fighter for regular Americans against the plutocracy.

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