How the White House is trying to fight inflation and what it means politically

Read the Full Transcript

• Geoff Bennett:

  This week, President Biden will travel to Portland and Seattle in his first visit to the Pacific Northwest as president. The White House says his visit will center on his efforts to address inflation, as Americans see skyrocketing prices on everything from groceries to gas. For more on how the White House is trying to fight inflation, and for what it all means politically, I spoke with Linette Lopez of Business Insider and our special correspondent Jeff Greenfield.

  Linette, we'll start with you because the year over year inflation rate is now at 8.5 percent. That's the highest since December 1981. As you well know, I was struck that both the Fed Chairman Jerome Powell and the Treasury Secretary Janet Yellen have both said that it's time to retire the term transitory when discussing current inflation trends here in that country. So I guess the question is, are we going to be dealing with high prices for a while is inflation here to stay?

• Linette Lopez, Business Insider:

  I think the picture is a little bit complicated, and that's mostly due to the war in Ukraine. So, we have points of inflation that come from the Coronavirus pandemic, we have supply chain issues, and we have weirdness on our demand. We had a lot of demand for goods during the pandemic. And now some of that demand is switching over to services, which didn't have demand during the pandemic. So that whole dynamic is making prices very wonky that will pass.

  But the problem is that now we have to deal with the war in Ukraine. And that has led to rising prices in commodities, from wheat to oil to fertilizer. And that is going to complicate things. And we don't know for how long.

• Geoff Bennett:

  And Jeff, let's talk about the politics of this because inflation is damaging for a White House on multiple levels. One, there's little that this president or any president can do to contain costs. And it's also an issue that resonates for every American, whether he or she is buying gas or trying to buy groceries.

• Jeff Greendfield, Special Correspondent:

  That's the key. For us the political cliche, it's a powerful message. And it's a message that cuts across race, gender, party preferences, age, and it is a powerful negative message. It's so overwhelms the news about economic growth, that most Americans think we're now in a recession, even though statistically, that's not true.

  And to make it worse for the White House, we haven't had high inflation in 40 years. So eight and a half percent inflation, which in 1980 would have been an improvement is now something that people really feel they're suffering under.

• Geoff Bennett:

  And when that when I talk to White House officials, they say that those of us in the media focus too much on inflation, that yes, inflation is at a 40-year high. But the unemployment rate is actually at a 50-year low. And looking at the last jobs report, hiring is up in this country across the board, except in one sector, which is trucking, which really just compounds the inflation issue.

• Linette Lopez:

  I don't know if you notice this, but Walmart is paying $120,000 a year to truckers, they — no one can find them anywhere. So, the labor shortage is also contributing to this inflation, because wages are going up.

• Geoff Bennett:

  Jeff, give us the long view here. Because the sort of current bout of inflation is a moment I think of deja vu for people who lived through the price hikes of the early 1980s. How did the administration at the time deal with it and what political price did they pay?

• Jeff Greendfield:

  Well, presidents because they're blamed for inflation, try to do things and they have very little power. Richard Nixon imposed wage price controls something shocking for a Republican. But as soon as they were ended, like a cork that's filled out of a leaky pipe, inflation went back. Gerald Ford tried a PR strategy. Let's whip inflation. Now there were wind buttons, which I'm sure are very valuable.

  The one president who indirectly made a huge impact was Jimmy Carter by appointing Paul Volcker, Chair of the Federal Reserve Board, he looked at 15 percent inflation, strangled if I can use that term, the credit market, interest rates went up to 20 percent unemployment. We had a big recession went up to 10 percent. It cost Reagan and the Republicans in the '82 midterms. But by '84, inflation was pretty much gone. The economy was OK. And Reagan had a landslide. And for Biden, does he really want to be faced with a recession in November. I doubt it.

• Geoff Bennett:

  Linette, what about that? I mean, one thing that the U.S. has going for it right now is that the economy is strong and the labor markets pretty high.

• Linette Lopez:

  Yes, I definitely wouldn't want to be in Joe Biden's position. Do you allow prices to increase? How much? How active? Should the Fed be? The Fed seems to be very cautious. It's slow rolling this but Donald Trump put a lot of pressure on the Fed. So I think Biden will try to stay away from that because he doesn't want to do what his predecessor did.

• Geoff Bennett:

  And Jeff, as we wrap up this conversation. Earlier, you mentioned political messaging, the White House has coined what is now a new, proper noun to describe inflation. It's Putin's price hike in all capital letters, they're now using it in emails and press conferences and things. The term was initially used to describe the increase in gas prices, but now they're using it for everything across the broader economy. Will that resonate do you think?

• Jeff Greendfield:

  I would not bet a plug nickel on it. As I said, there are no footnotes at the gas pump or the meat counter. You know, you don't say well look at what Putin did. The polls say Americans would support Biden, you know, in this fight against Putin, but the polls also say Americans want to eat more vegetables and exercise. I think the, you know, the President is the guy at the center of that target. And I don't think an attempt to change that the verbal messaging is not much chance of success.

• Geoff Bennett:

  Jeff Greenfield and Lynette Lopez, thank you both for your insights. We appreciate it.