Defensively, Biden says the spending bill will bring inflation down
Consumer prices hit a 31-year high in October, a worse-than-expected inflation report that put President Biden on the defensive and spelled more trouble for his unfinished massive social spending.
The consumer price index, which monitors the cost of goods like gasoline and groceries, rose 6.2% in October compared to October 2020, the Labor Department reported Wednesday. That was the biggest increase since December 1990 and higher than the Dow Jones estimate of 5.9%.
Worsening inflation reinforced the arguments of economists like Democrat and ex-Treasury Secretary Larry Summers, who said for much of this year that more government spending and higher taxes would “further boost an already overheated economy.”
The price increases in the last 12 months are nationwide:
â¢ Unleaded gasoline, 51.3%.
â¢ Heating oil, 59.1%.
â¢ Beef, 20.1%.
â¢ Chicken, 8.8%.
â¢ eggs 11.6%.
â¢ Television, 10.4%.
â¢ Children’s shoes 7.5%.
â¢ Baby food 7.9%.
Furniture and bedding prices have increased the most since 1951.
Shares fell sharply on reports of record price increases. The Dow Jones Industrial Average fell 240 points, or 0.66%, to close at 36,079 points. The Nasdaq fell 1.66%.
The developments put Mr. Biden’s $ 1.75 trillion spending bill at risk, which will require the support of all 50 Democratic senators to pass. Senator Joe Manchin III, a West Virginia Democrat who has repeatedly expressed concern about the bill’s impact on inflation, raised the alarm again Wednesday.
“According to all reports, the threat of record inflation to the American people is not ‘temporary’ but is getting worse,” Manchin said in a statement. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans experience every day.”
Mr Biden defended his spending plans and the historic proposed tax increases to lower inflation. On his trip to Baltimore, he said that more government spending on port infrastructure from a $ 1.2 trillion bill he will sign on Monday will ease the supply chain crisis, make more goods available and lower consumer prices.
“This law will reduce the cost of goods,” said Mr Biden, who stood in front of dock workers and shipping containers on the water. “We will make significant progress.”
Still, administration officials said it would take months to identify infrastructure projects for expansion and renovation.
The president blamed the COVID-19 pandemic for “stretching supply chains like never before”. Mr Biden said he received assurances Tuesday from the CEOs of Walmart, Target, FedEx, UPS and others that shelves would be “restocked” over the holiday season.
He said steps to relieve shipping congestion in California ports have helped. Still, he said: âConsumer prices remain too high. It is worrying even if wages go up. “
The port in Baltimore is building cranes for unloading cargo and a new berth for container ships. A tunnel is currently being expanded by $ 125 million to allow shipping containers to be loaded onto railroad cars more quickly.
Some economists and Republican lawmakers turned down Mr. Biden’s prospect.
“Today’s dismal consumer price index combined with the rising 8% producer price index earlier this week is evidence that President Biden’s policies make the lives of working class Americans worse, not better,” said Steve Moore, a Conservative economist, who advised President Trump. âAnd full-fledged Bidenonomics through its Build Back Better plan will only make inflation worse by spending trillions more dollars that we don’t have. Inflation is not âtemporaryâ nor is it just âhigh level problemsâ. It hurts all Americans, especially the poor middle class. “
As the prices of various goods rise during the holiday season, there is a growing feeling that high inflation is the new normal. Consumers will also have to adjust to the heating costs for their homes this winter.
The Alignable network released a survey of 3,430 small businesses across the country on Wednesday that found inflation to be the top concern for the second straight month.
The survey found that 90% of small businesses fear that inflation may affect their recovery, and 48% are âvery concernedâ about it.
Republicans are signaling that they want inflation to be a major pillar of the 2022 midterm elections. In Iowa, the state Republican Party on Wednesday targeted vulnerable Democratic MP Cynthia Axne over inflation and Mr Biden’s welfare law.
“The Democrats are finally beginning to understand what I’ve known all year: inflation is wiping out Iowans,” said Republican Party leader Jeff Kaufmann. âAs Iowans experiences soaring gasoline prices, empty shelves and thin paychecks, Cindy Axne is focused solely on implementing the biggest tax hike in decades. Axne has yet to admit that inflation is a problem and proves how little contact she has with Iowans. “
Ms. Axne did not respond to a request for comment.
Texas Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, said inflation is “a wage cut that families cannot afford.”
“No wonder Americans now rank inflation as their biggest concern alongside COVID – and believe Biden’s $ 4 trillion tax and spending spree will only make prices worse,” he said.
Some economists say government spending is not the main cause of the rising inflation rate. Josh Bivens, director of research at the left-wing Economic Policy Institute, said higher prices were “not driven by macroeconomic overheating.”
“Instead, this surge is largely being driven by COVID-related factors: a reallocation of spending away from personal services and towards goods, combined with supply chain bottlenecks,” he said.
He added that he believes the adoption of the Build Back Better package is “the right move”.
Indeed, Mr Bivens said that part of the “demand boost” created by the US $ 1.9 trillion bailout this spring “has shifted to price and wage pressures.”
In a statement shortly after the Consumer Price Report was released, the president said his $ 1.75 trillion proposal, which would expand the social safety net with programs like universal pre-kindergarten and broader health care, would reverse rising prices and create jobs .
“It’s important that Congress pass my Build Back Better plan, which is fully paid for and doesn’t add to debt by providing more affordable health insurance and prescription drugs – along with a tax cut for 50 million Americans, including most families with.” Children, âsaid Biden.