The surging inflation has been blamed by President Biden repeatedly on tangled supply chain problems. But a former Obama official dismissed this argument as “totally dishonest” on Thursday.
Steven Rattner, who was the Treasury secretary under President Barack Obama, accused Biden of mischaracterizing this once-in-a generation inflation spurt that Americans are currently experiencing in an opinion piece for The New York Times.
“Supply problems are not the root cause for our inflation,” Rattner wrote. Rattner said that blaming inflation on supply issues is like complaining that your sweater keeps you too warm even though you have added many logs to your fireplace.” “The majority of our supply problems are not caused by overstimulated economies.
Rattner was referring specifically to statements that Biden made last week in an interview with Lester Holt of NBC News. In which he stated that pandemic-induced supply chain bottlenecks were the biggest driver of soaring consumer price. Biden cited semiconductor shortages as the reason for the 12.2% increase in vehicle prices each year.
Biden stated that inflation was caused by the disruption of supply chains. He said that automobiles, for instance, were affected by the shortage of computer chips. These chips are essential for building automobiles that can function. They were not available.”
Rattner admitted that the pandemic had indeed stretched supply chains. However, he stated that the primary source of inflation is rapid consumer demand. This was fueled in large part, he said, by unprecedented levels government spending, which included three stimulus payments.
Aside from that, Americans are shifting their purchasing habits due to the pandemic. Many Americans have switched to buying goods such as cars, electronics, and building materials for their homes rather than entertainment or travel. According to the Labor Department, spending on durable goods increased 25% in 2021 compared to 2020.
He said, “It’s a classic case of too much money chasing down too few goods,” which results in higher prices and, due to the extreme surges in demand, shortages.
Biden’s remarks came as the government reported that January’s consumer price index increased 7.5% from a year earlier. This is the fastest increase in inflation since February 1982 when it was 7.6%. CPI, which measures a variety of goods including gasoline, health care, groceries and rents, jumped 0.6% in one month from December.
This was the eighth consecutive month that the gauge had been at 5% or more.
Rattner stated that in order to control rising prices, the Biden administration must change its approach. Instead of focusing on passing yet another trillion-dollar spending package to fund it, the economist suggested that the White House prioritize reducing the deficit.
Rattner stated, “That’s the way Bill Clinton voted after he assumed office in 1993.” To address the urgent matter of the federal deficit, he unexpectedly increased taxes in his budget. This decision was a good one for the country, and it served him well.