US President Joe Biden faces an even bigger battle to enact his spending proposals and retain his party’s control of Congress in the wake of a January inflation report that showed an unexpectedly large surge in the cost of living for US citizens.
Just weeks after Biden claimed that consumer-price gains had hit a peak, a government report showed Thursday that inflation remains on the upswing -- sowing doubts about whether the White House fully has its arms around a crisis that may be broadening.
The US Department of Labor said Thursday the consumer price index (CPI) climbed 7.5 percent over the 12 months to January – its largest increase since February 1982 – while it rose by 0.6 percent compared to December, more than analysts expected.
The data defied hopes by US President Joe Biden's administration that the wave of price increases sapping his public approval would show signs of decelerating in the first month of 2022, and further bolstered expectations that the Federal Reserve will soon increase interest rates.
In a statement, Biden acknowledged that inflation "is elevated" but "forecasters continue to project inflation easing substantially by the end of 2022."
The inflation data couldn’t come at a worse time, with the window closing for the president to repair his image in the minds of voters worn down by the pandemic and its economic ramifications. Congressional midterm elections loom in November.
For the moment, experts see the Democrats losing ground in November. Republicans need a net gain of just five House seats to take control of that chamber, and only one seat to regain the reins in a Senate now split 50-50 between the political parties.
Array of factors
Republicans leapt at the opportunity the data offered. Minority Leader Mitch McConnell took to the Senate floor to lay blame on the US$1.9-trillion pandemic relief bill passed without GOP support last March.
“The severity of this inflation was directly fuelled by the reckless, far-left spending spree that every single Democrat in this chamber voted to ram through,” he said.
An array of factors is seen as driving the price increases, from the Fed's easy money policies meant to support the economy during the pandemic to supply chain snarls, shortages of components and labour and robust demand from US consumers.
Rent costs increased the most in nearly two decades, food and energy prices surged, and the cost for household furnishings and health insurance rose by the most on record.
“Inflation is up. It’s up. And – coming from a family when the cost of gas went up you felt it in the household, you knew what it was like – it matters,” Biden acknowledged in an event Thursday afternoon in Culpeper, Virginia.
The White House has attempted to reign in the increases by announcing a host of initiatives.
Economic Adviser Jared Bernstein underscored moves to address the cost-of-living surge. “We have a very active agenda both near, medium and long term to try to ease price pressures,” he said in an interview.
However, the Fed is the institution best placed to stem the price hikes, said Jason Furman, a former chair of the White House Council of Economic Advisers during Barack Obama's presidency, under whom Biden served as vice president.
"The truth is the president can do very little to lower inflation. He can and should do everything he can on supply (and he is doing most of it already) but (it) won't add up to much," he said in a tweet.
"The Fed needs to hike in March," he added.