On The Money — Biden keeps up battle against inflation
President Biden is exploring his options to combat inflation, including a possible gas tax suspension. We’ll also examine the impact of pilot shortages and economists’ recession predictions.
But first, check out the massive “heat dome” bringing blazing temperatures this week.
Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.
The big flaw in Biden’s plan to fight inflation
President Biden’s hands-off approach to fighting the highest inflation in four decades poses major risks to the economy and his political fortunes.
Biden made clear earlier this month he will do nothing to push the Federal Reserve away from increasing interest rates as high as possible to curb price growth. But as the Fed picks up the pace of rate hikes, economists fear the bank will be forced to trigger a recession as it struggles to fight supply shocks beyond its control.
The Fed’s main weapon against inflation is raising its baseline interest rate range, which increases borrowing costs throughout the economy in order to lower prices.
Rate hikes will not boost the international supplies of oil, wheat, fertilizer and other crucial commodities depleted by the war in Ukraine and sanctions on Russia, or resolve supply chain backlogs from China’s COVID-19 containment policy.
Raising rates also raises the risk of a recession next year, but Biden has insisted that such an outcome is “not inevitable.”
Sylvan and Alex Gangitano have more here.
GAS TAX BREAK?
Biden expects decision on federal gas tax holiday by end of week
President Biden on Monday told reporters he hoped to make a final decision about whether to support a federal gas tax holiday by the end of the week as high fuel prices continue to pose a problem.
“I hope I have a decision … by the end of the week,” Biden said from Rehoboth Beach, Del., where he spent the weekend.
Biden did not rule out sending gas rebate cards to Americans, though administration officials have in recent days sounded cool to the idea.
A recent study found that suspending the federal gas tax from March to December would reduce average per-capita gasoline spending by between $16 and $47 for that period.
Suspending the federal gas tax would require an act of Congress, but a public push by Biden in favor of the policy could help spur action on Capitol Hill.
The Hill’s Brett Samuels has more here.
UP IN THE AIR
American Airlines ending service to three cities due to pilot shortage
American Airlines will eliminate service for three cities following the Labor Day holiday weekend as a result of staffing shortages, marking the latest hiccup for the airline industry amid thousands of cancellations and cuts in recent months.
An airline spokesperson said the company will drop service to Toledo, Ohio; Ithaca, N.Y.; and Islip, N.Y., on Sept. 7 in response to a “regional pilot shortage.”
Travel demand has surged, with large numbers of Americans taking trips for the first time since the start of the pandemic. The Transportation Security Administration said it screened about 2.44 million people at airports on Friday, a total greater than any other day since Nov. 28, 2021.
Meanwhile, airlines have struggled to keep up with rising demand after shedding millions of jobs at the height of the pandemic, driving prices higher. Thousands of flights were also canceled or delayed this past weekend ahead of Father’s Day and Juneteenth.
The Hill’s Zach Schonfeld has more on this here.
RECESSION PREDICTIONS
Economists see 44 percent chance of recession in next year: survey
The probability of the U.S. hitting a recession within the next year is about 44 percent, according to a new Wall Street Journal survey of leading economists.
That’s the highest probability for a recession in the next year since the newspaper began asking the question in 2005, the Journal noted.
Before the 2007 to 2009 recession, economists assigned a 38 percent probability of a recession. Before the 2020 recession, they gave the economy a 28 percent probability of hitting a significant economic downturn.
Former Treasury Secretary Larry Summers said Sunday on NBC’s “Meet the Press” that, based on historical trends, the economy will likely hit a recession by the end of the year.
Check out more on this here from The Hill’s Brad Dress.
Good to Know
National Economic Council Director Brian Deese on Sunday said the White House is hoping to make progress on legislation to lower prescription drug prices and other costs “in the coming weeks.”
Deese stressed to CBS “Face the Nation” moderator Margaret Brennan that combating high inflation levels remains the White House’s top economic priority.
Here’s what else we have our eye on:
President Biden on Monday praised workers at an Apple store near Baltimore that voted to form the first American union at the Silicon Valley tech giant.
The Virginia Senate this weekend shelved a proposal by Gov. Glenn Youngkin (R) for a three-month gas tax holiday that had passed the GOP-controlled House of Delegates.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.
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