High inflation in the United States: Biden’s plan to fight rising prices

The Biden administration is changing its tune on inflation: Treasury Secretary Janet Yellen now says she was “wrong” about the duration of high inflation, and President Biden himself called inflation of the country’s “main economic challenge” while announcing plans to combat rising prices. .

CNN’s Wolf Blitzer interviewed Secretary Yellen aired a montage of clips from last year for her on Tuesday, in which Yellen said there was a “small risk” of inflation and that it would be “manageable” for the US economy. Blitzer asked Yellen if she was wrong in that assessment.

“Look, I think I was wrong then about the path that inflation would follow,” she replied, noting that there were big economic shocks that affected food and energy prices that she hadn’t anticipated.

Yellen’s comments came directly after he met President Joe Biden and Federal Reserve Chairman Jerome Powell in the Oval Office, where they coordinated efforts to fight inflation.

Last year, Powell and Yellen called inflation “transitional,” that is, temporary. Now, with inflation above 8% in March and April — a level not seen since the 1980s — the Biden administration is shifting gears. He publicly lays out a game plan to fight soaring prices, while claiming his powers are limited.

What is Biden’s plan to reduce inflation?

In an editorial published by the the wall street journal over Memorial Day weekend, Biden called inflation “the nation’s biggest economic challenge right now,” echoing what many Americans have been saying for months.

Recent polls show that Americans not only think inflation is America’s biggest economic concern, but also the biggest problem facing the country in general.

Over the past few months, as inflation persists at nearly four-decade highs, Americans’ views of the economy have only soured. A new Gallup poll released on Tuesday shows that 46% of Americans say current economic conditions are “bad” and 77% say they are only getting worse.

Moreover, the Gallup poll shows that a new factor has dethroned inflation as the most important problem facing the country: the lack of government leadership.

Biden addressed growing economic fears and uncertainty in the op-ed, framing them against the backdrop of solid economic gains since the peak of the pandemic and a scorching job market.

“With the right policies,” Biden wrote, “the United States can transition from recovery to stable, steady growth and lower inflation without giving up all of these historic gains.”

Ads by Money. We may be compensated if you click on this ad.A d

Are you looking for ways to save money right now? Bundling home and auto insurance is a great way to save money.

Most households could save an additional 20-25% by bundling their home insurance with their auto insurance. Click below to get a free quote today and see how much money you could save.

See how much you can save

Specifically, he outlined his three-part plan to get inflation under control:

  • Getting out of the way of the Federal Reserve: The US central banking system, aka the Fed, is primarily responsible for keeping inflation in check. President Powell has indicated that he will do whatever it takes to achieve this, even if it comes at the expense of the labor market. The Fed has two main levers to dampen inflation: raise interest rates and reduce its bond portfolio by $9 trillion. The agency is currently removing them both.
  • Reduced costs for families: One of the biggest price shocks to the US budget comes from gas. The national average price for a gallon of gas on Thursday is $4.72, according to AAA. This is the highest gas price ever and about $1.68 more than a year ago. Biden pointed to recent actions he has taken to coordinate the largest release of oil from global reserves to help bring prices down. At the same time, he sanctioned Russian oil companies, a move he acknowledged would drive up prices at the pump. Biden also mentioned proposals to cut housing, prescription drug and child care costs, but said Congress should act.
  • Further reduce the federal deficit: In 2020, the federal deficit reached a record $3.1 trillion. A deficit occurs when the government essentially spends more money than it brings in. In 2021, the deficit fell below $2.8 trillion, the second highest ever. But by 2022, as Biden noted, the deficit is on track to drop to $1 trillion, according to the nonpartisan Congressional Budget Office. Biden says his economic policies accelerated the recovery of the US economy, ultimately increasing government revenue and reducing the deficit. He wants to cut the deficit even further by collecting more taxes from billionaires and corporations, although that also depends on congressional approval.

If Biden’s platform makes one thing clear, it’s that the president alone cannot solve inflation.

“We can’t take immediate action yet to my knowledge to figure out how we’re getting gasoline prices down to $3 a gallon,” Biden said during a meeting with White House officials and manufacturers on Wednesday. . “And we can’t do that immediately when it comes to food prices either.”

After all, monetary policy is the domain of the Federal Reserve, but the Fed’s ability to fight inflation is also limited. President Powell said in a May press conference that the Fed is essentially fighting inflation with “blunt tools” that are “not capable of surgical precision”.

Currently, the Fed is raising interest rates to reduce consumer demand, but if it raises rates too quickly, it risks sending the United States into another recession. This is only part of the equation, of course, as global supply chain issues are seen as a major contributor to current inflation levels.

To solve many supply chain problems, Biden will need help, both international trading partners and Congress. And he knows it.

“I will work with anyone – Democrat, Republican, or Independent – who is willing to have an open and honest discussion that will bring real solutions to the American people,” Biden wrote.

More money :

4 Best Money Moves for June 2022

US corporate monopolies worsen inflation: Fed report

96% of top economists expect the US to have high inflation for the rest of 2022