An Obama-era economic adviser rebuffed President Joe Biden on Thursday for blaming record inflation and growing economic woes on supply chain problems.
What is the background?
NBC News anchor Lester Holt later confronted Biden over his assertion in July 2021 that inflation would be "temporary," asking the president what his "definition of temporary is."
Biden responded by calling Holt "a wise guy," and then he proceeded to blame continued supply chain issues for growing inflation. Biden also claimed that advisers tell him that inflation "ought to be able to start to taper off as we go through this year."
What happened now?
Steven Rattner — an economics expert who served as counselor to the Treasury Department early in the Obama administration — explained in an essay for the New York Times that Biden's excuse is "dishonest."
Explaining that Biden's excuse is both "simplistic and misleading," Rattner declared, "supply issues are by no means the root cause of our inflation."
"Blaming inflation on supply lines is like complaining about your sweater keeping you too warm after you’ve added several logs to the fireplace," Rattner explained. "The bulk of our supply problems are the product of an overstimulated economy, not the cause of it."
According to Rattner, the true cause of inflation is a significant increase of spending on durable goods — items, Rattner explained, "for which production and distribution capacity is limited" — which he said has been caused by "vast amounts of government rescue aid," a reference to three stimulus bills passed because of the COVID-19 pandemic.
Thus, the problem in the U.S. economy boils down to "too much money chasing too few goods," Rattner explained, "resulting in both higher prices and, given the extreme surge in demand, shortages."
In addition to product shortages, Rattner also pointed to the so-called "Great Resignation" and labor shortages. "Note to Mr. Biden: You can’t blame clogged ports for that," Rattner quipped.
So what should Biden do?
According to Rattner, the White House "needs to be more honest" and "should make deficit reduction as important as its other initiatives," which includes not lying about his legislative agenda, like the since-killed Build Back Better Act. The Biden administration claimed BBB did not cost anything, but that was not true.
Rattner also suggested the Federal Reserve take "robust action," presumably a reference to raising interest rates. Larry Summers, a Democratic economist who served as treasury secretary for Bill Clinton and a top adviser to Barack Obama, has also said the Fed should immediately end quantitative easing.