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Biden’s cure for inflation shouldn’t be harsher than the disease

With US inflation at its highest level since 1981, the short-term electoral future of the Democrats relies on the president doing something.

By Emily Tamkin

Inflation is now at 8.6 per cent in the US, the highest in decades. In response, the Federal Reserve plans to raise interest rates. The head of the Fed, Jay Powell, testified before Congress this week and said that a recession was “certainly a possibility”. That wasn’t the intention, he assured, but there were other factors, such as Russia’s war in Ukraine and Covid-19 elsewhere in the world. Some figures, like the Democratic senator Elizabeth Warren, noted that high inflation and a recession would make matters worse, not better. Powell said unless he saw evidence that inflation was moderating, he would have to raise rates.

Others have encouraged going even further than an unintentional recession: the former US treasury secretary Larry Summers said that the US needs years of high unemployment to fight inflation. This would mean millions of people not having a job.

To state the extremely obvious: Summers’ quote is about an abstraction. Unemployment goes up, inflation goes down. But for millions of people, unemployment is not an abstraction. Five per cent unemployment probably wouldn’t include Summers’s professorship at Harvard, but it would include many Americans who rely on their jobs to support their families and themselves.

[See also: Hillary Clinton: “I don’t think the media is doing its job”]

A recession, the Joe Biden administration has reiterated, is not inevitable. That is a good thing, because the government has acted as though a wide variety of controversial policies – from reproductive rights to gun control – are simply out of its hands. On Thursday, for example, Biden said in a statement, “I call on Americans across the country to make their voices heard on gun safety. Lives are on the line.” And indeed they are, which is part of why millions of Americans voted for Biden to be president. So that he could do something about it.

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To state another obvious point: if there is a recession and high unemployment – if people can no longer afford or find goods because they cost more, and also because they are out of work – the American voter will blame Biden and the Democrats. If the cure is worse than the disease, they will blame the team that administered it. There isn’t anything inevitable about that, either, provided that, in the months ahead, the Biden administration doesn’t act as though there’s nothing to do but watch millions of people end up without jobs.

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This article first appeared in the World Review newsletter. It comes out on Mondays and Fridays; subscribe here.

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