Thanksgiving and the Coming Fed Fight
President Joe Biden began Thanksgiving week by announcing he had asked Federal Reserve Chair Jerome Powell to stay on for a second term. The move angered some progressives on Capitol Hill, including Sen. Elizabeth Warren (D-Mass.), who do not think Powell has done enough to address issues like income inequality and climate change and who wanted to see Lael Brainard become the second female to lead the nation’s central bank. (Instead, President Biden nominated Brainard to be the Fed’s vice chair.) Other progressives, including Rep. Pramila Jayapal (D-Wash.), who chairs the Congressional Progressive Caucus, praised the President’s decision to pick Powell for another term.
While the president might lose some votes from his left flank on the Powell nomination — indeed, Sen. Warren already has said she will cast a no vote — as a Republican Powell has plenty of support from the GOP. This, combined with the support he’ll receive from most Democrats, means he should easily secure a second term when the Senate votes on his nomination.
That support does not mean the confirmation process will be pretty, however. As the financial newsletter Morning Brew put it, “The highest inflation in 31 years has put more pressure on the Fed to wind down its pandemic-era stimulus measures and hike interest rates ... without sparking a recession in the process.”
Lawmakers will have questions. Lots of them.
Republicans are likely to see an opportunity to grill Powell about the Biden administration’s economic policies, including the Build Back Better Act, and their impact on inflation. (Democrats reportedly already have posed pointed questions about rising costs to Powell during private meetings.) Americans, after all, are worried about inflation. The GOP hopes to make the topic an election year issue.
Going into the holidays, it is likely inflation worries will get worse before they get better. Just based on what will be on the table this Thursday — turkey, bread, vegetables, and desserts — families will be acutely aware they are dealing with rapidly rising costs of goods.
The Rising Cost of Thanksgiving Dinner
According to AXIOS and the American Farm Bureau, the average Thanksgiving meal this year will cost about 14 percent more than it did in 2020. Specifically:
The centerpiece on most Thanksgiving tables, the turkey, will cost about $1.50 per pound, up 24 percent from 2020;
A dozen dinner rolls will cost approximately $3.05, a 15 percent increase from last year;
A one-pound vegetable tray with carrots and celery will cost 12 percent more than it did in 2020;
Pie crust prices have risen 20 percent from a year ago while the cost of a 30-ounce can of pumpkin pie mix is up seven percent; and, finally,
Prices for cranberries have increased 11 percent in the last 12 months.
There is good news if stuffing is your favorite side dish, however: a 14-ounce bag of cubed stuffing mix will run you just $2.29 — a price that is down 19 percent from last year. And, perhaps most importantly for many, alcohol prices also are down.
But stuffing and alcohol are outliers. Pork prices are up 14.1 percent from a year ago, the biggest increase since 1990, and the cost of a new car is up almost 10 percent. That increase is the most profound since 1975. And if you are freshening up your home, you definitely will be paying more. Cost increases for furniture are rising at levels not seen since 1951.
As The Wall Street Journal explained this week, companies also raise consumer costs in other ways. One common option is to reduce the size or weight of a product while keeping the price the same. Businesses also might offer fewer coupons or deals, or even just eliminate perks like free shipping. As The Journal said, “Even increasing the threshold for free shipping, from $49 to $99, is tantamount to a price increase.”
Tactics like these will raise holiday shopping costs this year. And most Americans think these inflationary impacts could be with us well into 2022 — no matter what Fed Chair Powell or President Biden say.
Growing Number of Americans Are Concerned about Inflation
While Powell and White House officials all have said inflation is temporary — or “transitory” — Americans don’t seem to be buying that argument.
In fact, we don’t have to wait for the turkey to be carved for proof that Americans are concerned about inflation. The New York Times reported families are curbing their Thanksgiving travel plans because the price of gas is at its highest level in seven years. The national average for a gallon of gas is $3.41, $1.29 more than it was a year ago. The Times reported that in some places across the country, drivers are paying up to $7.59 for a gallon of unleaded gasoline.
No wonder parents want to stay put.
Public opinion surveys also confirm Americans are worried. Indeed, according to a new Morning Consult/Politico survey, the anxiety is overwhelming. Nearly 9 in 10 voters are concerned about inflation. That number includes nearly half of Democrats. A CBS News/YouGov poll released on Monday found 82 percent of Americans say the products they are buying now cost them more than they did just months ago. Rising costs have contributed to Americans’ overall view of the economy. Back in July, 45 percent of voters said the economy was in a good spot. Now just 30 percent are willing to say that. That’s a staggering downtick in such a short period of time.
Americans in rural areas of the country are particularly concerned about rising prices, Morning Consult reported. According to economic analyst Jesse Wheeler, the share of rural adults who said they are “very concerned” about inflation has risen 12.2 points since June — that jump is about three times the rise seen for adults living in urban areas.
And who do Americans blame for rising costs? The Morning Consult/Politico survey found about 60 percent pin rising inflation on Biden administration policies. According to the CBS News/YouGov poll, only 33 percent of Americans approve of how the president has handled rising inflation. That compares to 53 percent of voters who approve of how the commander in chief has handled distribution of the COVID-19 vaccine.
What’s more: another Morning Consult/Politico survey, this one released this week, showed Americans think the president’s Build Back Better Act could make consumer prices rise even faster. A plurality of respondents, 43 percent, said they believe the economic spending package would make inflation worse. Only 26 percent said it would make inflation better. (Even so, about half of voters support passage of the legislation, which is likely to be debated by the Senate in December.)
What Can the White House Do about Inflation?
While the president can nominate the country’s central bankers — who work to achieve balance between inflation and maximum employment — there is not much else the White House can do to address rising prices.
As historian and writer Jeff Greenfield explained in Politico last week, “Presidents have almost no power to ease the pain of inflation, and the voting public cuts presidents no slack at all because of that impotence.” According to Greenfield, both John F. Kennedy and Lyndon B. Johnson tried to convince companies and labor unions to address rising costs by holding down wages. Richard Nixon actually took action to freeze wage and price increases and inflation was up to 11 percent by his last year in office.
President Gerald Ford asked Americans to send him ideas to save energy and wore a button that said, “Whip Inflation Now.” As Greenfield reported, Alan Greenspan, who chaired President Ford’s Council of Economic Advisors, later called the campaign “unbelievably stupid.”
President Biden isn’t wearing a button yet, but he clearly is getting anxious. Last week he sent a letter to the Federal Trade Commission to look into oil and gas companies and whether “anti-consumer” behavior has caused higher gas prices.
The fact that the president had to resort to sending a letter to an agency chaired by his own appointee indicates how little the White House actually can do on this matter. Bill Hoagland, senior vice president of the Bipartisan Policy Center told Politico, “I feel a little bit sorry for the president. A lot of this is out of his control.”
That fact will not matter, though, once Powell and Brainard are in front of the senators in charge of approving — or rejecting — their nominations. When they take the witness stand for their respective confirmation hearings, expect plenty of talk about prices, and plenty of blame for the Biden administration.
The president understands this reality. As The Hill reported, when President Biden announced the Powell and Brainard nominations, he expressly linked the decision to give Powell another term with the battle against inflation. The president said Powell's “patience, skill and independence” would help meet the Fed’s traditional objectives of achieving “maximum employment” and keeping inflation “low and stable.”
Will putting a Republican in charge of curbing inflation help improve the president’s poll numbers and improve Democrats’ chances of holding the House and Senate next year?
Only time, and our gas and grocery bills, will tell.