As inflation reaches record highs and consumer prices continue to skyrocket, President Joe Biden wrote an op-ed in The Wall Street Journal about his plan to stabilize the economy.
Biden emphasized the need for a “historic recovery” in the aftermath of the COVID-19 pandemic and building an economy that “works for working families.”
“The most important thing we can do now to transition from rapid recovery to stable, steady growth is to bring inflation down,” Biden said.
The Deseret News invited three economists and pundits to respond to Biden’s op-ed. Their responses are below.
Biden’s decision to publish an op-ed on his “solutions” for inflation shows us that he understands at least one thing: Inflation is a top concern for voters. Unfortunately, that’s probably the highlight of his entire argument — because most of the rest of the op-ed is politician-speak and substance-free buzzwords.
It essentially ignores one of the biggest causes of the ongoing inflation surge: our central bank, the Federal Reserve, and its decision to (digitally) print trillions of dollars out of thin air, in hopes of “stimulating” the economy. Of course, all this really did was “stimulate” inflation, as the dollars in existence inevitably lost value and prices rose when more dollars chased the same amount of goods. Yet Biden’s supposed plan totally fails to address this root cause. Indeed, he explicitly promises not to do anything at all to influence the Federal Reserve or scale it back, saying instead he trusts the knowledge of his appointees ... some of whom, like Fed Chairman Jerome Powell, are the very ones who got us into this mess in the first place.
Still, the president is right when, later in the op-ed, he cites the need to continue reducing the budget deficit in order to tamp down inflation. (Massive multitrillion-dollar budget deficits have certainly played a role in the ongoing surge in prices.) Yet Biden’s actual policies since taking office have made the deficit much bigger than it otherwise would’ve been, according to the nonpartisan Congressional Budget Office.
No one person or president is to blame for inflation. But if inflation stops surging, as we all sincerely hope, it will be in spite of Biden’s efforts, not because of them.
Brad Polumbo is a policy analyst at the Foundation for Economic Education and a fiscally conservative journalist.
Christian vom Lehn
I think the big-picture economics in Biden’s op-ed are sensible — combat inflation by reducing demand (either via fiscal discipline or monetary tightening) or by trying to expand supply (though short-run policy options here are usually limited). I think this framing of the issue is productive and an improvement from previous messaging that attributed rising prices to corporate power/greed (which is yet an important issue to study, but economists widely agree is unlikely to account for recent inflation).
I think the three big debates that still can be had on this issue are: how much of this heightened inflation comes from forces outside our control (COVID-19, Ukraine) versus the effects of policy; whether the administration waited too long to prioritize combating inflation; and the details of any particular policy proposal for addressing inflation.
I don’t know that the current evidence we have gives many definitive answers to any of those debates. But I am encouraged both by sound economic principles being used to guide current policy discussions and recent evidence that inflation is already beginning to slow down. I’m optimistic that policy actions currently being taken by the Federal Reserve and policies being discussed by the Biden administration will help to reduce inflation significantly by the end of the year.
Christian vom Lehn, Ph.D., is an assistant professor of economics at Brigham Young University.
Julie Y. Cai
Low- or moderate-income families are still facing uncertainties economically moving forward. It is good to see that Biden has a series of measures to focus on working families and invest in underserved markets. The Housing Supply Action Plan, for example, would expand low-cost housing supply and make housing stock more flexible.
We have seen rising housing hardship among racial and ethnic minority families and families with children during the pandemic. Amid high inflation and rising rent and home prices, economic tradeoffs continue to be part of low- or moderate-income families’ everyday decision-making.
But this is not going to be a quick fix, and housing issues in some rural areas also need attention. Expanding access to housing subsidies and easing barriers to new construction, particularly in underserved communities are vital for a more inclusive post-pandemic economy.
It is also good to see that Biden mentioned investment in child care infrastructure, ensuring good-paying jobs for educators who invest in early childhood education. This is an often overlooked but crucial system for sustainable growth of society and working families.
Julie Y. Cai, Ph.D., is an economist for the domestic program at the Center for Economic and Policy Research.