Spike in inflation presents further challenges for the Biden administration
A MARTINEZ, HOST:
Consumer prices in March jumped by 8.5% from a year ago. That is the highest inflation rate since December of 1981 and presents further economic and political challenges for the Biden administration. The war in Ukraine has led to a spike in global energy prices, and in response, President Biden says the U.S. will be releasing a million barrels of oil per day from U.S. reserves for the next six months. Yesterday, Biden unveiled plans to waive restrictions on a blend of higher ethanol gas, which he says is about 10 cents a gallon cheaper. But as Americans feel the pinch beyond the pump, what else should be done? We're joined by Brian Deese, director of the National Economic Council and the president's top economic adviser. So right off the bat, I mean, inflation is hitting all of us - how fast can you provide relief for consumers?
BRIAN DEESE: Well, you're right. The price increase in March had the word Russia written all over it. Putin's invasion of Ukraine is not only causing a humanitarian catastrophe, but it's taken Russian oil off the market and driven the price of oil up. And so we saw about 70% of the increase in March was due to the rising energy prices as a result. You've also seen the president act, as you mentioned, an historic effort to put a million barrels a day onto the market from our strategic reserves. And yesterday, he was in Iowa talking about steps with E15, which will provide some relief as well. The good news is, since the highs in March, we've seen gas prices come down about 20 cents a gallon nationwide. They're still too high, and we still need to work to try to bring them down further. But ultimately, the global coalition that we have assembled to combat Putin's aggression is one that we need to keep in place. That will have impacts globally.
DEESE: But this is a president that's going to do everything that he can to try to mitigate those impacts at home.
MARTINEZ: So you mentioned Vladimir Putin. President Biden referred to Tuesday's inflation report as Putin's price hike. Prices were climbing way before the war. How much longer can the president and the administration continue to blame Vladimir Putin for something that was happening before this even began?
DEESE: Look; this isn't an issue of blame. If you look at the facts, in March, 70% of the increase was from energy, 63% of that was from gasoline. Those prices went up because Russian oil came off the market. But you're absolutely right - price increases are too high across the board. That's not an issue that we have shied from; it's an issue that we have leaned into. This is a global problem. Inflation is hitting record highs around the world - in the U.K., in the Euro area and beyond - because we have a globally supply-constrained economy. So we're focused, practically, in the United States on what we can do to bring that down. That includes the president taking the kinds of actions that he's taken with respect to oil and gas prices. It also includes calling on Congress to take steps to lower costs for consumers. We have legislation in front of the Congress right now that would lower consumers' utility bills, it would lower prescription drug costs, and it would also bring the deficit down. All of those would help consumers and help moderate on the inflation front.
MARTINEZ: And I realize that it is a global problem. It's happening all over the world. But I think American voters are concerned with what's happening inside the United States. Last year, early 2021, the consumer price inflation rate was under 2%. Today, it's around 8%. I mean, so I think that's what Americans want an explanation on, is how did it get to where it is now from well before the Ukraine war?
DEESE: Well, recall that a year ago, the economy was in freefall and lockdown because COVID had shut down our economy and the - we did not have an effective response to actually keep our economy open and our economy going. What's happened in the period since is we've engineered a recovery that has seen the strongest economic growth in 40 years, the strongest labor market outcomes ever in an American recovery, the unemployment rate down to 3.6%. We have real challenges, but we also have strengths, and we do want to build on those.
MARTINEZ: And I keep going back to 2021 because remember; last year, an article from Larry Summers, who was a former U.S. Treasury secretary, blamed inflation - or, actually, warned about inflation on the American Rescue Plan, which put $2 trillion, almost, into the U.S. economy. That was a response to the pandemic, but those warnings were there from last year. What do you say to that?
DEESE: The American Rescue Plan was a historic effort to provide a recovery plan, a viable recovery plan, to do what we need to do to get COVID under control, to help people. Remember back a year ago, there were lines at food banks miles long. Hunger was up. People did not know where the future of this economy was. As a result of the actions that we have taken and what we've seen happen, we're not talking about a weak labor market and all of the costs that that has for the economy. We're not talking about hunger in America in the same way. We have made a lot of progress as a result. But we have a global challenge. We have a global challenge, and inflation is affecting economies everywhere. And so we have to do what is necessary now to bring those price increases under control.
MARTINEZ: But so, yes, I understand that shelves were empty back then, but now if the shelves are full, people can't afford to buy the stuff on the shelves.
DEESE: Well, just to be clear, you know, we are seeing incredible resilience in this recovery, resilience in the labor market and also resilience in the American consumer. The price increases hurt, and they hit families and their pocketbooks. At the same time, we are seeing consumption sustained through multiple shocks. This economy has been through the shock of delta, the shock of omicron and now the war in Ukraine, another global supply shock. And through it all, the American economy has been uniquely resilient. So we have challenges, and affordability is absolutely an issue. It's why the president went out yesterday, took the action to try to bring down a little bit of relief on the gas price front and why we are calling for additional relief to make things more affordable for American families.
MARTINEZ: That's Brian Deese, director of the National Economic Council. Thanks for taking the time.
DEESE: Thank you. Transcript provided by NPR, Copyright NPR.