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Can inflation kill a presidency? | ticker VIEWS

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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

BRUCE WOLPE ON TICKER NEWS

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.

Bruce Wolpe is a Ticker News US political contributor. He’s a Senior Fellow at the US Studies Centre and has worked with Democrats in Congress during President Barack Obama's first term, and on the staff of Prime Minister Julia Gillard. He has also served as the former PM's chief of staff.

World

Ian carves path of utter destruction

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After devastating Florida, Hurricane Ian is headed for Carolinas, Georgia

A grim picture of Hurricane Ian’s horrific wreckage emerged Thursday, as millions of people in Florida faced destroyed homes, completely flooded streets and power outages.

The storm’s power turned out to be worse than many had predicted.

Unfortunately, families who did not evacuate have been left stranded as rising water tore through their homes.

So far, hundreds have been rescued from floodwaters, and emergency crews are still struggling to reach some of the most devastated areas.

According to the National Hurricane Center, a storm surge of 12-18 feet hit as destructive waves struck the coast.

Officials say the hurricane knocked out power to more than 2.6 million customers, mainly in southwest and central Florida.

Meanwhile, the Florida Division of Emergency Management (FDEM) says that the next 72 hours will certainly be the most critical when it comes to rescue missions.

President Biden said there were ‘early reports of what may be substantial loss of life’ saying, that the numbers are still unclear but there are early reports of fatalities.

The President added, “water rescue is critical—Coast Guard deployed 16 rescue helicopter, six fixed wing aircraft and 18-rescue boats and crews. That’s just one element of the many federal search and rescue teams that were pre-staged in Florida.”

Florida Governor Ron DeSantis detailed the state’s “monumental effort” to help aid recovery and eventually rebuild.

“Those were really difficult images to see but we’re committed to restoring the infrastructure as needed. That is not going to be an overnight task. That is going to require a lot of love and care—it’s going to require a lot of resources, but we’re going to do it because we understand how important it is.”

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Climate Change

Hurricane Ian could be Florida’s deadliest storm

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Hurricane Ian could be Florida’s deadliest storm as it continues north towards South Carolina

U.S. President Joe Biden says Hurricane Ian could be the deadliest storm in the region’s history, with early reports suggesting substantial loss of life.

Biden spoke at an afternoon briefing at the headquarters of the Federal Emergency Management Agency (Fema).

Ian made landfall on Wednesday local time near the city of Fort Myers. It has led to severe flooding, high winds and storm surges.

Several areas remain submerged, and more than 2.5 million homes are without power.

Many residents are trapped in their homes and unable to escape. Search and rescue teams are working around the clock to provide assistance where they can.

5,000 Florida National Guard troops and 2,000 Guardsman from surrounding states have been deployed.

Eight teams with 800 members are carrying out search and rescue operations.

More than 200 public shelters have now been opened, housing around 34,000 people.

The National Hurricane Centre has downgraded Ian to a tropical storm for now but warns it will likely become a hurricane again later.

The entire coast of South Carolina is just the latest region to be placed on high alert as the storm continues north on its path of destruction.

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World

Finland slams its borders shut on Russia

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Finland will officially closed its border to Russian tourists, marking the last of Moscow’s E-U neighbours to do so.

Finland will close its border with Russia as Poland, Estonia, Latvia and Lithuania also closed theirs.

The Finnish government made the decision following Vladimir Putin’s decision to call-up of 300,000 military reservists.

Queue’s at Russia’s border crossings with E-U nations were stretching for kilometres as people attempted to flee the country.

The closure of the border only applies to tourists – and Russians who are visiting family or travelling for work or study will still be granted entry.

The Finnish Foreign Minister stated that the decision was a difficult one to make, but ultimately it was in the best interest of the country.

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