Ask two of the last three one-term presidents.  Both Jimmy Carter and George HW Bush suffered economies that veered out of control, with inflation surges followed by the inevitable interest-rate tightening by the Fed and recession

Both failed at re-election. (It took an act of God – Covid – to strike down the third one-term president: Trump.)  

On this most important Monday for Joe Biden – signing into law the largest investment in infrastructure in modern American history, and engaging in the most important summit of his time in office with China’s Xi Jinping – there is a raging political undercurrent:  Will inflation also kill Joe Biden’s presidency?

Presidents own the economy and inflation gets everyone’s full attention.

As Politico reported last week’s data from the Bureau of Labor Statistics:

“Gasoline prices are up 49.6% … fuel oil up 59.1% … utility natural gas up 28.1% … used cars and trucks up 26.4% … beef prices are up 20.1% … pork up 14.1% … bacon up 15.4% … chicken up 8.8% … eggs up 11.6% … milk up 4.3% … apples up 6.7% … coffee up 4.7% … peanut butter up 6% … baby food up 7.9% … prices for furniture and bedding costs had their biggest jump since 1951 … prices for new cars and trucks had their biggest jump ever.”

Larry Summers, who served as Treasury Secretary under President Obama, warned in February – to vehement disagreement from the White House – that Biden’s American Rescue Plan could trigger an inflation wave: 

“There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”

The White House pushed back hard on Summers’ analysis. 

“The risks of doing too little are far greater than the risks of going big,” one official said.  Biden had to go big and go early to get liftoff for the US economy, which is now booming with growth over 5%.  Jobs are up and unemployment is down.  Wages are up and the job market is strong. 

The general consensus among economists is that inflation pressures are not as structural as in the run-up to previous recessions:  the choppiness caused by Covid and the severe supply chain disruptions are the main drivers of goods shortages and price pressures. In short, for today’s US economy it is not 1979 or 1992.

But that does not help the pocketbook and the outlook. Inflation is taking back some of the wage rises for workers.

It makes Biden an easy mark for Republican hits that Biden’s socialist reckless spending spree will inflict immense harm. 

As a result, Biden’s slide in approval to the 40s, and the rise in his disapproval to over 50%, and the current mood, held by 70% of voters, that the country is on the wrong track, has all coincided with inflation’s emergence in the past four months. 

The inflation wave is cresting right at the moment Biden is pressing Democrats to unite and pass his Build Back Better program: $1.7 trillion in social programs and climate investment that will lower costs for children, education, seniors, health care, and promote a decisive shift from fossil duels to renewable energy.

But even the inflation hawks believe that the infrastructure bill Biden will sign into law today and the social rebuilding program before Congress right now are right for the economy.  Summers himself sees them very positively:

“I think it’s fine. The 10 years of the two spending bills together, A, are less than the one year of what they did last spring, and, B, unlike what they did last spring, are paid for by tax increases. So I don’t think that’s an inflation problem. I think a lot of it is vitally needed investments in the future of the country.”

Biden is counting on this calculus, and the proven polling appeal of all the elements of his program, to keep the Democrats united and to see this legislation through.  We will know the outcome by Christmas.

Biden always plays a long game: it took him 32 years to win the presidency.

He is working to bring home what the US economy could look like next year: Delta in retreat, robust growth, the supply chain fixed, inflation ebbing, wages up, jobs growing, significant investment in infrastructure across the country, support flowing to families and their kids, health care costs lowered, clean energy blooming.

That is his bet on the American people for 2022.  And he never, ever bets against them.