Economy experts are predicting trouble for President Biden as the nation draws closer to the November general election, leaving little time for his administration to fix the stubbornly high inflation plaguing Americans.
Inflation currently sits at 3.3% year over year, according to Department of Labor statistics. Although down from a near-record high of 9.1% in June 2022, it’s still higher than at any point in the last decade prior to Biden taking office.
The U.S. Federal Reserve announced Wednesday it would maintain the federal funds rate range at 5.25% to 5.5%, where rates have held steady since last July, an expected decision considering inflation rose less than predicted for the 12 months ending in May and the core Consumer Price Index rose a better than expected 3.4%.
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Former President Donald Trump, Federal Reserve Chairman Jerome Powell and President Joe Biden. (Getty Images)
Fed Chair Jerome Powell said that the report builds confidence that inflation is moving toward the 2% target but said more evidence is needed before the central bank begins easing policy.
Economist Peter Morici conceded the report was “certainly good news” for Biden, but said “prices are still up, and it’s only one report.” He also pointed to factors that influenced the report as not being pocket book issues for most Americans.
“[The report] was driven largely by energy prices falling. In the services sector, inflation is still very robust … Housing and the cost of shelter are rising 5% per year,” he said, adding that energy prices are subject to fluctuation and could look very different in a month.
“The underlying sources of inflation that trouble the Fed are still present. The Fed will not be able to cut interest rates a lot this year if at all. Even if it does, it will come too late to give much help to Joe Biden.”
Economist Peter Morici during an appearance on Fox News. (Fox News)
Joseph LaVorgna, an economist who served as chief of former President Trump’s economic counsel, told Fox he didn’t think inflation was going to come down, but also said, prior to the report, that the Fed “doesn’t want a quick reaction.”
“If I was advising the president, I’d want to do things to get inflation as low as possible,” he said. “The administration, I would argue, has pursued policies that have made the inflation situation unfortunately worse.”
“Never in the history of the economy have we ever run budget deficits above 5% of GDP with unemployment under 4%. That is a recipe for high inflation, which is what we have,” he said. “I’m concerned the only way we’re going to get inflation down, at least to where the guidelines are set where people aren’t feeling the pain of higher prices, unfortunately, is a recession.”
Dr. Arthur Laffer, an economist who served both the Reagan and Trump administrations, said he couldn’t predict how the economy and inflation would affect the overall results of the upcoming election, but argued the Biden administration had broken the major “kingdoms” of economics, namely by going in the wrong direction on taxes, government spending, monetary policy, regulation and trade.
Arthur Laffer speaks after US President Donald Trump presented him with the Presidential Medal of Freedom at the White House in Washington, DC, on June 19, 2019. (JIM WATSON/AFP via Getty Images)
“When I look at the Five Kingdoms — taxation, he moves in the wrong direction. Government spending? He moved in the wrong direction. Sound money? He moved in the wrong direction. Regulation is way moved in the wrong direction, especially in energy, but in other things too. On trade? He moved in the wrong direction,” Laffer said.
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“I can’t imagine an administration more at odds with what should be done, and the consequences are very, very clear,” he added. “The employment population is not quite back up to where it was prior to the pandemic. Price levels are way up. Interest rates — I could just go on and on. That’s the way I would look at him objectively, as an economist. [Biden] just doesn’t know economics and nor does his administration.”
When it came to the election, however, Laffer said you’d “have to get out your Ouija board.”
Fox Business’ Nora Colomer contributed to this report.
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