The Fed and White House combine for a day that cuts to the heart of Biden’s political problem



CNN

Two Washington powerhouses on Wednesday laid out the poisonous political dynamic surrounding the top economic issue threatening President Joe Biden’s congressional majorities with the midterm elections less than a week away.

The Fed prompted another historic interest rate hike and, about half a mile away at the White House, Biden hosted an event to highlight the administration’s broad efforts to expand the workforce in critical areas such as broadband and construction. One policy decision is expected to reverberate through markets, media and politics alike, directly targeting an issue that Democratic officials say has done significant damage to their political prospects. The other will detail an intensive administrative effort designed to reshape the pipeline to careers over time.

The difference between the two events is striking, given the compressed political timetable that Democrats now have to reset.

The federal program is aimed at training Americans and creating a strong pipeline of skilled workers who can work in specialized fields and, according to officials, is part of a long-term solution to combating labor shortages – one of the many drivers of related to the persistent inflation that still exists. at the height of almost four decades.

The Fed, meanwhile, continues its months-long effort to hit the brakes on an economy running red hot. The Fed approved a straight quarter hike of three-quarters of a percentage point on Wednesday as part of its aggressive battle to reduce the inflation that is plaguing the US economy.

WASHINGTON, DC - MAY 20: Newly redesigned $100 notes are stacked at the Bureau of Engraving and Printing on May 20, 2013 in Washington, DC.  The hundred dollar bills will be issued this fall and feature new security features, such as a duplicate portrait of Benjamin Franklin and microprinting added to make the bill more difficult to counterfeit.  (Photo by Mark Wilson/Getty Images)

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Biden’s event and White House speech are tied in between midterm campaign travel — he was in Florida on Tuesday and is due to head out West to New Mexico on Thursday.

A feature of Biden’s stump speech is his efforts to fight inflation, through major legislation and a range of executive actions to lower the cost of living.

“Democrats are lowering everyday costs like prescription drugs, health care premiums, energy bills and gas prices,” Biden said in a statement at Democratic National Committee headquarters last month.

The administration’s unprecedented actions to lower gas prices, aimed at releasing 180 million barrels of oil from the Strategic Petroleum Reserve over the past seven months, are also prominent.

But understandable in the Biden field is the difficulty created by the overarching problem as the clock ticks down to the day the votes are counted. The scale of the problem is made clearer by the hawkish approach being followed by the Fed, but perhaps even more importantly by the aggressive tone of its chairman, Jerome Powell.

“We want to act aggressively now and get this job done, and keep at it until it’s done,” Powell said at his news conference in September.

And so far the White House is standing by the Fed’s move despite mounting criticism from Democrats. After the rate hike, White House press secretary Karine Jean-Pierre said the administration values ​​the agency’s independence, saying it is “part of our transition to more stable and consistent growth.”

“This is the kind of economy that delivers for working families and that’s how we see the work of the Fed,” she said.

Biden and his top advisers have deliberately tried to reframe the economic debate over the midterms as a choice between the two parties instead of a referendum on Democratic control of Washington.

“This is not your father’s Republican Party, that’s a different deal right now,” Biden said at an event in Florida on Tuesday. “And there are a lot of good Republicans out there, but they’re under a lot of pressure.”

But as Republicans dive into the economy in multimillion-dollar campaign ads, the entrenched nature of the political problem remains.

Biden is addressing Russia’s war in Ukraine which has put pressure on energy market prices. The global economy is also continuously challenged by Covid infections, supply chain constraints, labor unrest and political instability. But American consumers have shown little sign of pulling back on their spending — and the American job market remains strong.

Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, U.S., July 27, 2022.

Powell says the job market will suffer as inflation falls

Biden, looking back at his prepared remarks at an event last week, mentioned an issue that White House officials have long seen hanging over everything: Exhaustion.

“I just think that one of the things that I think is holding the American people back is that they know that the world is in trouble,” Biden said, taking direct aim at the uncertainty this year due to invasion of Russia. “And they want to know what we’re doing? And we’ve got a lot going on that we’re doing.”

Billed by the White House as the “Infrastructure Talent Pipeline Challenge,” Biden on Wednesday highlighted efforts by both the private and public sectors to train workers in three sectors in particular: broadband, construction and electrification. Union workers made a presentation on how they are training employees in those areas, and the President spoke about new and existing efforts to train additional workers.

Biden said “more than 350 organizations across the country” are committed to the challenge, which the administration first launched in June. The challenge aims to connect Americans to new opportunities and is a call to action for employers, unions, education and training providers to make tangible commitments to support workforce development.

White House officials see the challenge pledges as a tangible result of three key legislative victories, which have laid the groundwork for significant change in the long-term infrastructure of the US economy. During Wednesday’s event and remarks, all three were highlighted – the bipartisan infrastructure law, as well as a law that accelerates American semiconductor chip manufacturing and a comprehensive $750 billion health care, tax and climate bill.

Still, Biden’s economic team has been working tirelessly for months to find policy options to ease the burden of rising prices, even if the prospect of a steady decline in the run-up to the election.

While they are very careful not to make economic projections, officials in the spring saw a path to a clear price slowdown in the fall – which would be a key piece of their economic pitch heading into the final weeks of the campaign. .

Instead, they are stuck staring down the rapid acceleration of FED efforts that have stuck markets and recruitment plans of some companies, inflation that is still stubbornly high and barely moving and the American electorate that registers complete frustration in the vast majority.

That Biden’s major policy wins were designed to address many of the pandemic-era drivers of the current inflationary moment — but it will still take time to implement — only serves to lay the frustration felt by many advisers. down in the moment they face now.

The legislative achievements of the Biden White House are concrete and significant — and the future they portend, officials say, is in many ways consistent with the proposals on which Biden campaigned. Private sector investments flooding into the United States by the tens of billions of dollars only reinforce the merit behind the effort, according to officials.

But less than a week from the counting of the midterm votes, Biden – and his party – remain at the political mercy of a problem that they have no tools to control immediately, stuck by events in the White House emphasizing policies that will take root over time.

Meanwhile, the Fed – and its months-long dramatic push to rein in inflation – will remain in the spotlight as undecided Americans make their final voting choices.

This story has been updated with additional developments on Wednesday.

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