Joe Biden’s empty inflation toolbox

President Joe Biden was clear. Inflation — now at the highest point in 30 years — was at the top of his concerns.

“Many people remain unsettled about the economy, and we all know why,” Biden said recently at the Port of Baltimore. “They see higher prices. They go to the store online … and they can’t find what they always want and when they want it. And we’re tracking these issues and trying to figure out how to tackle them head on ... reversing this trend is a priority for me.”

Left unspoken was a chilling reminder from history: Inflation has a unique power to kneecap a presidency. Incumbent presidents and their parties do not do well at all when inflation (and attempts to cure it) are on voters’ minds come election time. The gas pump, the supermarket check-out counter, the heating bill, the sticker on the windshield, provide — or seem to provide — powerful indictments against the party in charge.

If that’s not enough to unsettle the White House and its allies, consider this: Presidents have almost no power to ease the pain of inflation, and the voting public cuts presidents no slack at all because of that impotence. Look into the toolbox of our country’s chief executive and you’ll find it empty of effective tools, filled instead with devices now obsolete or laughable or meaningless or politically destructive.

Presidents John F. Kennedy and Lyndon B. Johnson were fans of “jawboning” — using their influence to persuade unions and companies to hold down wage and price increases. But those were days when large, powerful unions — the auto workers, steel workers, Teamsters — and large, powerful corporations like General Motors or US Steel could significantly affect the larger economy with their decisions. Who would Joe Biden “jawbone” now? The thousands of potential truck drivers whose absence from the road is helping to drive up costs? Asian factories where a microchip shortage has driven up the cost of new cars, which in turn has driven up the cost of used cars? The OPEC+ cartel, which has no interest in increasing oil production and may indeed be looking forward to $100 a barrel costs?

Richard Nixon tried a much more blunt instrument: In August of 1971, using powers that a Democratic Congress had delegated to him, he imposed a 90-day freeze on wages and prices. In the short run, it worked; but just as a temporary seal does not actually fix a leak, inflation resumed as soon as the controls ended. Inflation was running at over 11 per cent by the summer of 1974, a drag on the economy that undermined Nixon’s standing even as the Watergate waters were rising. (As Bill Clinton would later demonstrate, a vibrant, full employment-low inflation economy is enormously helpful to a politically embattled president.)

When Nixon’s helicopter lifted off the White House lawn, Gerald Ford was left with the double-digit inflation. His response was, in effect, a pep rally.

On Oct. 8, 1974, the president addressed a Joint Session of Congress and reported: “There is only one point on which all advisers have agreed: We must whip inflation right now.”

What followed was a textbook case of presidential irrelevance. Noting the pain at the grocery store, Ford said: “To halt higher food prices, we must produce more food, and I call upon every farmer to produce to full capacity.” To check the rising cost of professional services, he said: “The administration will zero in on more effective enforcement of laws against price fixing and bid rigging. For instance, non-competitive professional fee schedules and real estate settlement fees must be eliminated. Such violations will be prosecuted by the Department of Justice to the full extent of the law.”

He also asked Americans to send him 10 energy-saving ideas, and finally, he displayed “the symbol of this new mobilisation, which I am wearing on my lapel. It bears the single word WIN. I think that tells it all. I will call upon every American to join in this massive mobilisation and stick with it until we do win as a nation and as a people.”

The red and white “WIN” button instead became a different kind of symbol. Alan Greenspan, then-Ford’s Council of Economic Advisors chair, later recalled thinking that the campaign was “unbelievably stupid.” New York Magazine, in a column ridiculing Ford, showed a clown with a “WIN” button.

But if you’re looking for a president who did in fact do something to tame inflation — albeit indirectly — it was Jimmy Carter. When he appointed Paul Volcker as chair of the Federal Reserve Board, he put someone in a position of real power who was determined to fully exercise that power, no matter the consequences.

With an inflation rate in 1980 of more than 13 per cent — “It was the biggest inflation and the most sustained inflation that the United States had ever had,” Volcker recalled — he led the Fed to a historic tightening of the money supply.

Politico