Biden’s 'laser focus' on inflation rankles progressives inside administration

Runaway inflation is crushing President Joe Biden’s approval ratings and threatens to swamp Democrats in the midterm elections.

But many progressives — including some within the administration itself — say Biden's all-out messaging war against spiking prices is making matters even worse.

They fear that the administration’s unswerving support for the Federal Reserve’s campaign to choke off inflation will slam the brakes on the economy and undercut the few things the White House has moving in its favor. Among them: a strong labor market, solid wage gains and ambitious spending proposals in areas like child care and prescription drug costs that are popular with voters.

Frustration among administration progressives boiled over at the end of May when Biden declared his “laser focus” on inflation while meeting at the White House with Fed Chair Jerome Powell and rolled out a plan to combat spiking prices. Biden backed the central bank's aggressive interest rate hikes, which are aimed at cooling the economy by any means necessary, including inducing a possible recession.

“A lot of people were frustrated by [the rollout] and by the idea that we were going to try to Paul Volcker our way out of this problem,” said a senior official, referring to the legendary Fed chair of the 1980s who relentlessly jacked up rates to break the back of soaring inflation — triggering two recessions along the way.

The official, who like others inside the administration interviewed for this story declined to be identified by name, said the new messaging showed that “people who are inherently cautious are dominating” the internal debate, meaning the economic moderates in Biden's inner circle.

It’s not that progressives want Biden to put pressure on Powell to curb interest rate hikes as President Donald Trump once did. But Biden’s commitment to letting the Fed do whatever it deems fit instead of emphasizing the need to keep making labor market gains struck a nerve.

While every White House engages in internal policy debates, this one stands out because it reflects broader tensions that are roiling the party: Many progressives believe inflation is likely to ease on its own without severe rate hikes; more moderate voices say the only path to improving Democrats’ political fortunes is to bring prices down swiftly.

It’s an excruciating spot for the White House. Polls show inflation is a top concern to voters, so attacking it head-on seems like the smartest political move. Powell and many economists argue that the economy won’t work for anyone if inflation — now at its highest point since Volcker’s day — isn’t reversed quickly.

But progressives worry that Biden is abandoning the liberal vision of government’s role in countering decades of growing income inequality, further assisting women and people of color in making progress in the labor market, and transforming the nation’s infrastructure into one that relies on clean energy.

In remarks to union workers in Cleveland on Wednesday, Biden reiterated his commitment to bringing down prices, declaring, “I’m fighting like hell to lower costs on things you talk about around your kitchen table.”

Inside the administration, the debates are getting more intense as the midterms approach, with Biden’s approval ratings at their lowest levels ever and the economy showing some signs of tilting toward a slowdown. Friday morning will offer a fresh look at the economy’s health with the June jobs report expected to show solid gains but less than the 390,000 in May. The economy has added an average of about 500,000 jobs a month for the past six months.

A mixed picture is likely to provide fodder for both sides in a debate that senior aides say is mostly respectful but may not stay that way.

“It’s not like people are storming out of meetings or Zoom calls or yelling at each other all the time,” said a second senior administration official. “But sometimes there is just not a good answer or one that will satisfy everyone. And obviously, that can be frustrating.”

Some progressives want the president to come down much harder on what they view as corporate America’s role in artificially jacking up prices to fatten profits.

“The president's agenda that he rolled out in the State of the Union is the agenda that would have eased costs and addressed a lot of the things we could do to deal with families’ budgets,” Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, said in an interview. “That got stalled essentially by one person in the Senate,” she said, referring to Sen. Joe Manchin (D-W.Va.).

Jayapal says the White House should put big pieces of the Build Back Better package on child care, prescription drug costs, health care subsidies and environmental investments back into another big spending bill before the August recess, typically the last moment for any major legislation to have a prayer in an election year.

A White House official said Biden's policies are aimed at strengthening workers and the economy.

"President Biden has been a strong, explicit advocate for full employment conditions," the official said in a statement. "He has developed policies that helped achieve those conditions and voiced his argument that we want to fight inflation while maintaining those conditions."

The official added, "Inflation is the purview of the Fed. The Fed determines rate hikes. And we have been perfectly clear about the independence of the Fed to make the decisions they deem necessary."

To be certain, Biden has occasionally pursued the corporate price-gouging line of attack. Over the July 4 weekend, he tweeted at gas station owners to “bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.”

But his approach is not organized or consistent enough for some inside the White House economic team or for leading progressives like Sen. Elizabeth Warren (D-Mass.), who also fears the administration will relieve tariffs on Chinese imports to try to ease U.S. consumer prices.

So far, the White House has only made small changes to the tariffs imposed on China by Trump but is considering larger relief demanded by big business groups.

“The U.S. economy is growing faster than China’s and American manufacturing is booming with good-paying union jobs, but weakening our protections against unfair trade would not significantly reduce prices,” Warren said in a statement to POLITICO.

Progressives also want the president to hammer Republicans harder for resisting bolder structural changes. These include a global minimum corporate tax, a federal $15 minimum wage, surtaxes on the wealthy, and permanent changes to federal support programs for workers and families, along with clean energy tax credits.

The moderate v. progressive fight happens in pretty much every Democratic administration. But progressive power in the party is significantly greater than it was under Presidents Bill Clinton and Barack Obama. And Biden cannot afford to alienate his base.

On the Fed, Jayapal and other progressives worry that Powell will go too far, too fast, at least in part because he feels has a clear green light from the Oval Office.

“He should be very, very careful about increasing interest rates because we are already seeing some easing in inflation,” she said. “It would be a tragedy to see [recent labor market gains] thrown off into recession.”

Part of the tension is being played out between progressives and Treasury Department officials, including Secretary Janet Yellen.

Progressives are troubled by Yellen’s robust backing of Powell’s rate-hike campaign as well as her support for lifting some China tariffs.

Mike Gwin, deputy assistant Treasury secretary for public affairs, defended Yellen: “Secretary Yellen deeply respects the independence of the Federal Reserve in setting monetary policy, and like President Biden believes that the Fed’s independence is a key tool in our work to drive down inflation.”

Yellen backers also point to her recent comments in South Dakota in which she said the unique nature of the Covid recovery – a hot jobs market but stubbornly low labor force participation – suggests the Fed could cool inflation without driving up unemployment much.

On the China tariffs, White House progressives say that lifting the penalties would have a minimal impact on prices and could hurt American workers. Big labor groups are also mostly opposed to lifting the tariffs.

“It’s a policy that would get you very little and make a lot of people very mad,” said the second senior administration official.

In addition to Yellen, the more moderate-leaning camp in the White House includes Gene Sperling, who served as NEC director under Clinton and Obama, and current NEC Director Brian Deese, another Obama veteran who came to the Biden White House after a stint as global head of sustainable investing at Wall Street giant BlackRock.

“Brian is constantly trying to balance a bunch of different interests and he tries to be responsive to bigger progressive ideas,” said the first White House official. “But the result is usually that those ideas never get a real chance.”

The White House did not make Deese available for an interview.

Those in close contact with senior West Wing officials say Deese's deputy, Bharat Ramamurti, a long-time aide to Warren, is struggling to make an internal case in favor of letting the economy's momentum continue for a while to notch more job and wage gains.

“Bharat likes the alternate macroeconomic theory that says you can let the economy run hot,” said a Democrat close to the West Wing who asked not to be identified talking about internal dynamics. “He gets quite irritated that the theory is not being tried out.”

A person familiar with the matter says Ramamurti fully backs administration policy on the economy.

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By: Ben White
Title: Biden’s 'laser focus' on inflation rankles progressives inside administration
Sourced From: www.politico.com/news/2022/07/07/bidens-laser-focus-on-inflation-rankles-progressives-inside-administration-00044365
Published Date: Thu, 07 Jul 2022 03:30:00 EST

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