Keller @ Large: Experts say President Biden's economic plan isn't really solving inflation
BOSTON -- President Biden was all smiles Tuesday as he spoke to reporters right after the Bureau of Labor Statistics reported a 7.1% rise in prices last month compared to 2021. That's the smallest year-over-year jump in months. Key categories like energy and food prices also had more-modest increases.
"Things are getting better," the president said. But we wondered - is that really true?
"I would say unconditionally things are getting better if you look at how bad things were," said Art Hogan, chief market strategy for B. Riley Wealth. But he adds: "That's like saying 'hey, I've got a fever of 104 so I need to go to the hospital, but now my fever's 101, so I can just take an Advil and go to bed. So it's getting better but I still have the fever."
Boston University Questrom School of Business Prof. Jay Zagorsky noted that if you think of inflation as a balloon, 7.1% percent growth in size doesn't mean the balloon is deflating: "It means the majority of prices are actually going up, the balloon's getting bigger. Unless your wages have gone up by 7% you're actually worse off."
How about when the president said: "What is clear is that my economic plan is working"?
Zagorsky: "I'm not 100% sure I'd say it's the president's plan, but I will say there is a plan in Washington and it's having an effect."
Hogan: "One guy in Washington is not gonna affect that except around the edges when they change regulation and perhaps tax policy."
For politicians, optimism can lead to questionable claims. The president was asked: "Can you say when you expect prices to return to normal?"
He replied: "I hope by the end of next year or much closer."
Our economic experts agree he probably shouldn't go there.
"Presidents shouldn't necessarily try to take the credit for when things go well because then they own the blame when things go poorly," said Hogan. Zagorsky echoed: "I believe that presidents get far too much credit when the economy's doing well and far too much blame when the economy's doing poorly."
So if the president can't have much impact on inflation, who can?
Right now it's the Federal Reserve Board that's center stage. They're trying to manipulate interest rates to cool inflation down without putting us into recession.
Both our experts agreed the president's release of oil from our strategic reserves has helped lower gas prices, and the curbs on prescription drug prices kicking in next month will help some people cope. But this round of inflation is complex and global, and the truth is the president's control over what happens next is limited.
