If politicians know that bad news is threatened, then there is an effective antidote: pre-relativization. US President Joe Biden has now demonstrated how this works. The November inflation figures “do not reflect today’s reality, nor do they reflect the price declines to be expected in the coming weeks and months,” said the US President on Thursday, even before the relevant data were even published. This applies to petrol and gas, but also, for example, to the high prices for used cars, according to Biden.
How necessary the presidential attempt to weigh things down was shown on Friday, when the numbers were actually on the table: consumer prices rose by a staggering 6.8 percent year-on-year in November, again significantly more than in October. The rate of inflation thus reached its highest level in almost 40 years, that distant time when the cold warrior Ronald Reagan ruled Washington. You could also say that half of Americans have never experienced inflation on this scale.
One can of course argue that Biden’s frustration is not entirely unjustified. The government statisticians’ figures relate to the past month, so the very latest developments at the pump and in the supermarkets have not yet been taken into account. This is particularly annoying for the President because there has recently been a slight degree of relaxation, particularly with regard to the price of petrol, which the report has now whitewashed. The reverse is also true, however: many of the problems that contributed significantly to the return of inflation persist; In some places, such as housing costs, the situation has even worsened recently. Most experts therefore assume that the pressure will not decrease noticeably until mid-2022 at the earliest – if at all.
Biden’s Democrats are threatened with a setback in the 2022 congressional elections
But Biden doesn’t have that much time. Congressional elections are due in less than eleven months, and there are currently some indications that the ruling Democrats could lose their majority in both the Senate and the House of Representatives. That would be a political catastrophe for the President, because he would hardly have a chance to get laws and personnel proposals through Congress.
The government has therefore been working for weeks on a strategy to bring prices down. Biden asked the major ports in California, where container ships from China and other Asian countries have been queuing for months, that they switch to 24-hour operation. He instructed the competition authority FTC to examine whether the oil companies are enriching themselves at the expense of the citizens. And Treasury Secretary Janet Yellen invited the heads of leading US semiconductor manufacturers to find out how to eliminate the chip shortage from which almost all manufacturers, from cell phone to car to washing machine manufacturers, are suffering.
So far, none of this has brought great success. Not even the slight drop in gasoline prices that Biden now adorns himself with is not due to him. This is primarily due to the omicron variant of the coronavirus, which threatened the upswing and caused a price slump on the oil market. If it turns out that Omikron is more harmless than expected, the development could be reversed again.
Used cars alone currently cost one and a half times as much as a year ago
The Republicans, meanwhile, are using the worrying inflation figures to portray Biden as incompetent. You refer, among other things, to the trillion dollar corona, infrastructure, social and climate programs of the president, which would have fueled consumption and thus also prices. This analysis is not completely wrong, but it knowingly suppresses the fact that, in addition to the USA, many other countries, such as Germany, are struggling with inflation problems.
The main reason for the crisis is different: Many companies are still unable to manufacture and deliver their goods at the speed that citizens order them. Because factories are still closed in Asia and there are no intermediate products. Because there are no port workers and truck drivers who unload and transport the goods. Because slaughterhouses in the USA, for example, had to interrupt production due to corona outbreaks. In the absence of new cars, used cars alone currently cost one and a half times as much as last year.
The development is now so dramatic that the US Federal Reserve will probably announce next week that it will be scaling back its economic support programs much faster than planned. This means that the first rate hike since 2018 could be due in spring 2022. For Biden, that would be an extremely ambivalent thing: good for the fight against inflation, bad for the economy – and thus possibly also for the Democrats’ chances of being elected.