The word Biden won't say on inflation
President Biden wrote an op-ed this week entitled "My Plan for Fighting Inflation." The word "deficit" appears five times. The word "tariffs" never appears at all.
Why it matters: Biden respects the independence of the Fed, and trusts Fed chair Jay Powell to engineer a soft landing with "stable, steady growth" that doesn't involve any kind of recession. But he seems unwilling to bring down prices by cutting the Trump-era tariffs that U.S. importers have to pay on a wide range of goods.
What they're saying: "Reducing the federal deficit," writes Biden, "will help ease price pressures."
- That's not obviously true. Previous instances of enormous deficits, most recently under Trump, produced very little inflation, and deficits were much smaller in the years of high inflation.
- While an economic case can be made for higher taxes and/or lower spending as an inflation-fighting measure, such policies tend to work only very slowly and indirectly.
Between the lines: Axios' Hans Nichols has reported that Treasury Secretary Janet Yellen is in favor of cutting tariffs to fight inflation.
- Daleep Singh, the deputy national security adviser overseeing sanctions, has wondered aloud why "we have tariffs on bicycles or apparel or underwear," adding that "there's not much of a case for those tariffs being in place."
- Former Council of Economic Advisers chair Jason Furman told Axios that "removing the China tariffs is the single largest policy lever to bring down inflation that President Biden has."
The big picture: Politicians on both sides of the aisle have internalized the idea that the tariffs are hurting China more than they hurt the U.S., and that lifting them would be doing China a favor at a time when, geopolitically, no one wants to do that.
The bottom line: Economists, Yellen included, generally hate tariffs and would love to abolish some if not all of Trump's China tariffs. Obama might have listened to them; Biden is much less easily swayed.