The biggest inflation in the last 31 years hangs over the government of Democrat Joe Biden in the United States, a country where voters are often ruthless with officials beset by this obstacle in the economy.
In the 12 months ended in October, the index in the country reached 6.2%. In one year, the price of gasoline rose 50% and meat, 25%. Used cars are 26 percent more expensive, a rise driven by the drop in new vehicle production because of global semiconductor shortages.
“Inflation harms Americans, and reversing the trend [de alta] it’s one of my top priorities,” Biden said on the 10th. The mission is also about trying to escape the fate of two of his predecessors, who also struggled with escalating inflation in the 1970s.
Gerald Ford (1973-1977) urged people to save, asked them to hitchhike and lower the temperature of heaters, and distributed brooches with the words “Whip Inflation Now” (Defeat Inflation Now, with the acronym WIN meaning victory). The item became a joke and started to be used upside down (to form the acronym NIM or “Need Immediate Miracles”, I need immediate miracles). The Republican lost the election in 1976.
His successor, Jimmy Carter, tried to quell the price hike by asking Americans to abandon “unbridled consumerism.” Faced with the population’s unwillingness to sacrifice, the Fed (Central Bank) brutally raised interest rates — which ended up causing a recession that contributed to the defeat of the Democrat in his reelection bid in 1980.
This year, high prices combined with shortages in supermarkets and pharmacies hit the popularity of Biden in full. In January, right after the inauguration, the approval to the agent was at 57%. In the last Gallup poll, on the 16th, this share dropped to 42%.
It is the lowest approval rating for a president at this stage of the term since Dwight Eisenhower (1953-1961)—except Donald Trump and his 37 percent approval at that point.
Biden has told allies he plans to run for re-election in 2024, and this week press secretary Jen Psaki confirmed the intention. But in addition to convincing voters that his age won’t be an obstacle (he’ll be 82), he needs to persuade them that he can beat inflation.
Even economists from the Democratic establishment, like former Treasury Secretary Larry Summers, criticize the way the economy is run. “People see [a inflação] as a sign that the government has no control over things,” he said.
In practice, most of the price rise is due to mismatches in the supply chain due to the pandemic. Demand for some products rose more than the capacity of the sectors to resume production and increase supply — which also happens with the lack of labor. In addition, consumers who spent months saving money, with nowhere to spend because of closed stores, are now shopping. And still weighs the rise in oil, which leads to more expensive freight and numerous products; a worldwide phenomenon.
But for Republicans, the Fed has been lenient in not tightening monetary policy more quickly and the president’s stimulus packages put pressure on inflation. (Trump approved one during the pandemic, and Biden has now passed his, even more generous.)
The opposition has been successful in its mission to blame the Democrat. In a November 10 The Washington Post-ABC News survey, 48% of respondents said Biden is to blame for the price hike — 50% do not blame him.
“The US isn’t used to this level of inflation, which is double or triple the usual rates. And while the president has only partial influence over rising prices, he takes most of the blame, especially with the Democrats in control of Congress,” says Mark Jones, a researcher at the Baker Institute and a professor at Rice University.
“Bidenflation” T-shirts and an illustration of a gas pump have become a fad among Trump voters. He also viralized a mix of meme and fake news that shows a photo of empty store shelves, with the phrase “América de Biden”, alongside another one with a well-supplied market in “America de Trump”. It so happens that the image of the full aisles is of a market in Australia, in 2012; the famine of a store in South Carolina during Hurricane Florence in 2018 (ironically, during the Trump administration).
At first, the government adopted a posture of denial. In July, Biden said the price hike was transitory. Now, the White House and supporters admit the problem, but blame greedy companies and say the Build Back Better package, which is now in Congress, will help the economy and ease inflationary pressure.
The Democrat has also announced measures whose effect is more political than economic: he authorized the use of part of the strategic oil reserve, in joint action with China and other countries — in practice, the increase in supply should not be enough to lower prices ; and launched a plan to resolve bottlenecks in ports and an antitrust offensive.
The rise in prices is still far from the peaks faced by Ford (12.3%) and Carter (13.3%). And other economic indicators are positive — and stem, in part, from stimulus packages criticized by Republicans. The country has already recovered 80% of the vacancies lost in the pandemic and the unemployment rate is at 4.6%; in many sectors, there is a shortage of labor and high wages.
But, disconcerting technicians, the American population is more dismayed about the economy now than at the first peak of the health crisis, in April and May 2020, when unemployment reached nearly 15%. According to the Post-ABC News survey, the pessimism rate reaches 70%.
“Unemployment has fallen a lot, but the mood of consumers does not reflect objective indicators, at least not automatically. The effect of inflation [sobre o humor dos eleitores] it’s powerful because it’s palpable at the gas pump, at the supermarket, at Christmas shopping,” says Charles Franklin, a professor at Marquette University and an expert in policy research.
He recalls that Biden’s approval rating started to decline in July, with the disastrous withdrawal of US troops from Afghanistan, but that the drop continued into September and October, when the subject was no longer in the news. For him, racial and educational issues have also affected popularity.
The scenario makes the Democratic Party’s prospects for the 2022 midterm legislative elections bleaker. Jones recalls that the “midterms” are often hard enough on the presidential party. “With the economic difficulties, the internal conflicts between the progressive and centrist wings of the party and the Republican control in the redesign of districts, the risk of losing the Democratic majority in the House and in the Senate increases”, he says. “Biden’s only hope is to simultaneously resolve the conflict between the Democratic wings, extend the economic recovery to the most excluded and reduce inflation.”
The problem is that the medicine to end inflation can kill the recovery. The Fed puts it at risk if it accelerates too much monetary policy tightening, further reducing bond purchases — which injected liquidity into the market — and starting to raise interest rates earlier than expected.
“Free up strategic reserve [de petróleo] it’s one of the few things that can affect prices in the short term, and that Biden has already done. Historically, the Fed reduces the money supply and raises unemployment as a weapon against inflation. This triggered, or at least exacerbated, the recessions of the late 1970s and early 1980s, when the Fed did manage to contain inflation but paid a high price on employment.”
At the time, the rise in interest rates increased unemployment from 7.4% to 10% and strongly affected several indebted emerging countries, including Brazil. Biden now has no easy options ahead of him.
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