By Victor Reklaitis
President Joe Biden says fighting high inflation is his “top domestic priority,” and his administration has touted the moves it’s making to help Americans with rising costs.
They range from the largest-ever release from the U.S. Strategic Petroleum Reserve and expanded use of gasoline with 15% ethanol , to an ongoing pause for federal student-loan repayments and initiatives that make internet service free for 48 million low-income households.
Other steps include a housing plan that boosts financing for manufactured homes, a fix for an Obamacare glitch that should lower healthcare costs for an estimated 5 million Americans and additional student-loan efforts — such as canceling debt for 40,000 borrowers and correcting for past mistakes that denied 3.6 million borrowers credit toward forgiveness.
Economists continue to warn, however, that every president — whether Democrat or Republican — lacks powerful weapons for battling high prices . They’re reiterating a view that they voiced three months ago , before Biden talked up his efforts to tackle inflation in his State of the Union speech.
“A president has an extremely limited range of steps that can be taken to address this sort of inflationary shock driven by geopolitical events,” Joe Brusuelas, chief economist at consulting firm RSM US, told MarketWatch in an interview, referring to Russia’s invasion of Ukraine, which has lifted prices for energy /zigman2/quotes/209723049/delayed CL00 +0.49% /zigman2/quotes/210189548/delayed NG00 +1.02% and food .
“The release from the strategic oil reserves is what one would expect and really represents the upper boundary of that range,” Brusuelas said. But even that unprecedented release won’t have a “significant medium- to long-term impact on pricing,” he added, saying that’s because the “financialization of oil markets is just so large compared to the physical delivery of supply.”
Economists stress that it’s primarily the job of the Federal Reserve to fight inflation, and the American central bank — which is intended to be independent of the president and Congress — has started to do exactly that by raising interest rates.
“The bottom line is that there really isn’t all that much that can be done, except for the Fed to significantly begin to dampen demand,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, a nonpartisan forecasting firm.
The Biden administration “tapped the Strategic Petroleum Reserve, and yet we still have gasoline prices /zigman2/quotes/210286597/delayed RB00 +1.03% at record high levels. That in itself should tell you the limited power that the administration has,” Baumohl added.
The Economic Outlook Group expert is downbeat on the likely effects of Biden’s moves with E15 gasoline, free broadband internet and Obamacare’s “family glitch.”
“These are essentially Band-Aids. You will not see consumer prices come down in any tangible way, even with those policies being put in place. There’s just too many other factors at this moment that are driving prices as high as they are right now,” Baumohl said, referring to drivers such as Russia’s war on Ukraine and a range of supply-chain problems sparked by the COVID-19 pandemic.
“I’m afraid the tools, the weapons that the administration has are rather limited.”
RSM’s Brusuelas put forward a similar take, saying such efforts have to do with “optics” and help “around the margins.”
“You really want to help out? Extend the enhanced Child Tax Credit and make it permanent, but that’s not happened,” the economist said, referring to monthly payments to families that stopped in December after Biden’s “Build Back Better” plan stalled in the Senate .
Brusuelas offered some praise for Biden’s housing plan, saying it represents a “good first step” toward a solution to “what’s going to evolve into a housing crisis.” He also was upbeat on the measures for boosting housing production proposed in a recent Wall Street Journal op-ed by the director of the White House’s National Economic Council, Brian Deese, who wrote that column with the head of the U.S. Chamber of Commerce.
White House economist responds