Biden’s ‘laser focus’ on inflation angers progressives in administration

Frustration among administration progressives boiled over in late May when Biden declared his ‘laser focus’ on inflation during a White House meeting with Fed Chairman Jerome Powell and rolled out a plan. to fight against soaring prices. Biden has backed the central bank’s aggressive interest rate hikes, which aim to cool the economy by any means necessary, including provoking a possible recession.

“A lot of people were frustrated with [the rollout] and by the idea that we were going to try to get Paul Volcker out of this problem, ”said a senior official, referring to the legendary Fed chairman of the 1980s who relentlessly raised rates to curb soaring inflation. – triggering two recessions along the way.

The official, who like other administration members interviewed for this story, declined to be identified by name, said the new message showed that « intrinsically cautious people dominate » the internal debate. that is, the economic moderates in Biden’s inner circle.

It’s not that progressives want Biden to pressure Powell to rein in interest rate hikes like President Donald Trump has. But Biden’s pledge to let the Fed do what it sees fit instead of emphasizing the need to keep making labor market gains has struck a nerve.

While every White House engages in internal political debates, this one stands out because it reflects broader tensions swirling around the party: Many progressives believe inflation should subside on its own without severe rate hikes; more moderate voices say the only way to improve the political fortunes of Democrats is to bring prices down quickly.

It’s an atrocious place for the White House. Polls show inflation is a top concern for voters, so tackling it head-on seems like the smartest policy move. Powell and many economists argue that the economy won’t work for anyone unless inflation – now at its highest level since Volcker’s days – reverses quickly.

But progressives fear Biden is abandoning the liberal view of government’s role in countering decades of growing income inequality, helping more women and people of color advance in the workforce, and transforming the country’s infrastructure into a infrastructure that relies on clean energy.

In remarks to Cleveland union workers on Wednesday, Biden reiterated his commitment to lowering prices, saying, « I’m fighting like hell to lower the costs of the things you talk about around your kitchen table. »

Within the administration, debates are heating up as the midterms approach, with Biden’s approval ratings at an all-time low and the economy showing signs of tipping into a slowdown. Friday morning will provide a fresh look at the health of the economy with the June jobs report expected to show solid gains but below May’s 390,000. The economy has created an average of about 500,000 jobs per month over the past six months.

A mixed picture is likely to provide fodder for both sides in a debate that key aides say is generally 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, » a second senior administration official said. “But sometimes there just isn’t a right answer or an answer that will satisfy everyone. And of course, that can be frustrating.

Some progressives want the president to be much more critical of what they see as corporate America’s role in artificially raising prices to boost profits.

« The President’s agenda that he presented in the State of the Union is the agenda that would have cut costs and addressed many things we could do to manage family budgets, » the representative said. Pramila Jayapal (D-Wash.), Chairman of the Congressional Progressive Caucus, said in an interview. « It was basically blocked by one person in the Senate, » she said, referring to the senator. Joe Manchin (DW.Va.).

Jayapal says the White House should put big chunks of the Build Back Better package on child care, prescription drug costs, health care subsidies and environmental investments into another big spending bill before the August recess, usually the last time 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 and explicit advocate for full employment terms,” the official said in a statement. “He developed policies that helped achieve those conditions and made his point that we want to fight inflation while maintaining those conditions.”

The official added: “Inflation is the Fed’s purview. The Fed decides on rate hikes. And we have been perfectly clear on the independence of the Fed to make the decisions it deems necessary.

To be certain, Biden has at times pursued the line of attack of rising corporate prices. The weekend of July 4, he tweeted at gas station owners to “lower the price you charge at the pump to reflect the cost you pay for the product. And do it now.

But his approach is not organized or cohesive enough for some members of the White House economics team or for leading progressives like Sen. Elizabeth Warren (D-Mass.), which also fears the administration is easing tariffs on Chinese imports in an attempt to lower U.S. consumer prices.

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

« The U.S. economy is growing faster than China, and U.S. manufacturing is booming with well-paying union jobs, but weakening our protections against unfair trade would not significantly lower prices, » Warren said in a statement. at POLITICO.

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

The moderate vs. progressive fight happens in just about 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.

At the Fed, Jayapal and other progressives worry that Powell is going too far, too fast, at least in part because he has the clear green light from the Oval Office.

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

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

Progressives are troubled by Yellen’s strong support for Powell’s rate hike campaign as well as his support for lifting some Chinese tariffs.

Mike Gwin, Deputy Assistant Secretary of the Treasury 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 independence of the Fed is a key tool in our work to reduce inflation.”

Yellen’s supporters also point to her recent comments in South Dakota in which she said the unique nature of the Covid recovery — a booming job market but stubbornly low labor force attachment — suggests that the Fed could curb inflation without increasing unemployment too much.

On Chinese tariffs, White House progressives say lifting the sanctions would have minimal impact on prices and could hurt American workers. Major labor groups are also overwhelmingly opposed to lifting tariffs.

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

In addition to Yellen, the more moderate White House camp 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’s 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 sensitive to big progressive ideas,” the first White House official said. « But the result is usually that those ideas never really have a chance. »

The White House did not make Deese available for interview.

Those in close contact with top West Wing officials say Deese’s deputy, Bharat Ramamurti, a longtime aide to Warren, is struggling to make the case for the continued momentum of the West Wing. economy for a while to create more jobs and wage gains.

« Bharat likes the alternative macroeconomic theory that says you can let the economy run at full throttle, » said a Democrat close to the West Wing who asked not to be identified when speaking about internal dynamics. « He’s quite irritated that the theory is untested. »

A person familiar with the matter said Ramamurti fully supports the administration’s policy on the economy.