Inflation offers steep hike for Biden

The White House is grappling with another gloomy inflation report that threatens both President Biden's sweeping social spending bill and Democrats' prospects in the midterm elections.

Consumer prices increased 7 percent in December from the same month the previous year, according to the Labor Department, representing the fastest increase in prices in nearly 40 years as the U.S. economy recovers from the unprecedented COVID-19 pandemic.

"It was an ugly report," said Mark Zandi, chief economist at Moody's Analytics. "But I think we're past the worst of it. We're pretty close to past the worst of it."

Surging prices have complicated the White House's message about a robust economic recovery from the pandemic, which saw the unemployment rate decline to 3.9 percent last month.

On Wednesday, White House officials were quick to note that the rate that inflation increased in December was less than the two previous months, evidence of it beginning to slow.

"We saw a welcome deceleration in the rate of price increases in a number of respects," White House National Economic Council Director Brian Deese told reporters during a briefing, adding that data is "moving in the right direction."

At-home food price increases slowed and gas prices actually fell, which Biden highlighted in a statement as evidence his administration is making progress in slowing down the rate of price hikes.

"Politically, the fact that gas prices are falling, not rising, is really good news," said Jason Furman, who chaired the Council of Economic Advisers under former President Obama. "Economically, most economists look through movements in gas prices when they try to assess what's going to happen going forward."

While economists generally believe that inflation will decline substantially over the next year, consumers are likely to feel its effects for several months. This could spell trouble for Democratic incumbents in the looming elections as the party tries to hold onto its narrow majorities in Congress.

"The inflation sting is still going to be hurting come November, even though it will be down a lot," said Zandi, who estimated that inflation would be about half what it is currently, or 3.5 percent, by Election Day.

The White House and Democrats have argued that passing Biden's climate and social policy bill will help offset rising costs by lowering expenses for American families.

"The Build Back Better act addresses inflation by lowering childcare, energy, housing and healthcare costs for everyday Americans," Rep. Hakeem Jeffries (D-N.Y.) tweeted Wednesday. "Republicans talk about inflation. House Dems are doing something about it."

However, the package has been stalled after Sen. Joe Manchin (D-W.Va.) withdrew support for the House-passed version last month due to concerns about inflation. Wednesday's report, while expected, is likely to harden those concerns.

The U.S. Chamber of Commerce, a pro-business lobbying group, seized on the new data to argue against Biden's Build Back Better agenda.

"Today's numbers are a reminder that we need policymakers focused on combating inflation. That means avoiding policies, like the current so-called Build Back Better Bill that will fuel greater near-term price increases. Instead policymakers should pursue policies that will reduce inflationary pressures, including addressing the worker shortage crisis, expanding trade, and reducing tariffs," said Suzanne Clark, Chamber president and CEO.

Economists such as Furman predict that the impact of Biden's proposal on inflation would be minimal and confined to the short term.

The inflation numbers were followed by more dismal news for the president on Wednesday: polling that put his approval rating at a new low. A Quinnipiac University survey found that just one-third of Americans approve of the job that Biden is doing as president, and 34 percent approve of the job he is doing on the economy in particular.

"Under Joe Biden everything costs more, store shelves are empty, and small businesses are struggling to hire workers and stay open," Republican National Committee Chair Ronna McDaniel said in a statement on Wednesday.

Deese, the White House official, called lowering prices for Americans Biden's "principal focus" with respect to the economy.

"We are well positioned to attack the challenges of prices and costs head on. And that's exactly what the president and this administration are doing," Deese told reporters Wednesday.

When asked how much longer should Americans expect to be paying inflated prices, Deese pointed to independent forecasters' expectation that prices will moderate over 2022.

"That's consistent with the administration's view. And you have a president and administration that's waking up every day and thinking about the practical actions we can take to try and help accelerate that," he said.

The White House has prioritized targeted efforts to ease supply chain bottlenecks at ports and in the trucking industry that have contributed to price surges. In November, the administration also released 50 million barrels of oil from the nation's Strategic Petroleum Reserve to help ease energy prices.

Deese told reporters that the administration plans to take further "practical" actions at ports, such as imposing fees on empty idling containers and setting up inland locations for ports so they can move containers off docks faster.

He also said the White House would continue to push for Build Back Better.

Jared Bernstein, a member of the White House Council of Economic Advisers, said on CNN Wednesday that Congress should pass a bill that would boost semiconductor production that has stalled in the House.

But there are limits to what the president can do to combat rising costs. Much of the power to control inflation rests with the Federal Reserve.

Jerome Powell, whom Biden has nominated to a second term atop the Fed, told lawmakers during his confirmation hearing Tuesday that the central bank is prepared to raise interest rates if necessary to control inflation, which he characterized as a "severe threat."

The health of the economy is also inextricably tied to the pandemic, which is currently raging across the U.S. due to the spike in cases driven by the highly contagious omicron variant.

The Biden administration has focused on driving up COVID-19 vaccinations and booster shots and expanding access to COVID-19 tests in order to keep businesses and schools open. Currently, two-thirds of eligible Americans are fully vaccinated against the coronavirus.

"There's not a lot they can do to get inflation down other than getting the pandemic under control," Zandi said. "All roads lead back to the pandemic and waves of the pandemic, so that needs to be their focus."