The Federal Reserve and the White House unite for a day at the heart of Biden’s political problem



CNN

Two centers of power in Washington on Wednesday revealed the politically toxic dynamics of the major economic issue threatening President Joe Biden’s majority in Congress as the midterm elections approach less than a week away.

The Fed triggered another historic rate hike, and about half a mile away in the White House, Biden hosted an event highlighting the administration’s intense efforts to expand the workforce in critical areas such as broadband and construction. One policy decision is expected to spill over into markets, media and politics alike, directly highlighting an issue that Democratic officials say has seriously damaged their political prospects. The other details an extensive management effort designed to reconfigure the pipeline to enter careers over time.

The difference between the two events, in the compressed political timeline that Democrats are now seeking to reset, is stark.

The federal program aims to train Americans and create a strong pipeline of skilled workers who can work in specialized fields that amounts, officials say, to part of a long-term solution to address labor shortages — one of many factors for persistent inflation that remains near four-year highs. contracts.

Meanwhile, the Federal Reserve is continuing its months-long effort to put the brakes on the faltering economy. The Federal Reserve agreed to raise interest rates for the fourth time in a row by three-quarters of a percentage point on Wednesday as part of its fierce battle to bring down inflation plaguing the US economy.

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Biden’s White House event and speech fall between his midterm campaign trips – he was in Florida on Tuesday and is scheduled to travel west to New Mexico on Thursday.

His efforts to fight inflation, through key legislation and a suite of executive measures to lower the cost of living, are a feature of Biden’s reckless rhetoric.

“Democrats are cutting your daily costs like prescription drugs, health care premiums, energy bills and gas prices,” Biden said in remarks at the Democratic National Committee headquarters last month.

Also prominent are the unprecedented measures taken by the administration to lower gas prices, centered on releasing 180 million barrels of oil from the Strategic Petroleum Reserve over the past seven months.

But implicit in Biden’s speech is the difficulty posed by the overall problem as the clock ticks until the day the votes are counted. The scale of the problem has been made increasingly clear by the Fed’s hawkish approach, but perhaps more importantly by the aggressive tone of its chairman, Jerome Powell.

“We want to move aggressively now and get this job done and keep it going,” Powell said at his press conference in September.

So far, the White House has sided with the Fed’s move despite mounting criticism from Democrats. After raising rates, White House Press Secretary Karen Jean-Pierre emphasized that the administration respected the agency’s independence, saying it was “part of our transition to more stable and consistent growth.”

“That’s the kind of economy it provides for working families, and that’s how we see the Fed’s work,” she added.

Biden and his top advisers have sought a deliberate effort to reframe the economic debate surrounding the midterm elections as a bipartisan choice rather than a referendum on Democratic control of Washington.

“This isn’t your dad’s Republican Party, it’s a different deal now,” Biden said at a party in Florida on Tuesday. “And there are a lot of good Republicans, but they are under a lot of pressure.”

But as Republicans hit the economy with millions of dollars in election ads, the entrenched nature of the political problem remained.

Biden faces the Russian war in Ukraine that has shaken energy market prices. The global economy is also facing the ongoing challenge of COVID infection, supply chain constraints, labor unrest, and political instability. However, US consumers have shown few signs that their spending is slowing – and America’s job market remains strong.

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

Powell says the labor market must suffer because of low inflation

Biden, as he deviated from his prepared remarks at last week’s event, hinted at an issue that White House officials have long considered hanging over everything: fatigue.

“I think one of the things that I think is frustrating the American people is that they know the world is in a bit of a mess,” Biden said, referring directly to the uncertainty this year driven by the Russian invasion. And they want to know what to do? And there’s a lot we do.”

Biden on Wednesday, described by the White House as an “infrastructure talent pipeline challenge,” outlined efforts by both the public and private sectors to train workers in three sectors in particular: broadband, construction and electricity. Union workers gave presentations on how they trained employees in these areas, and the president spoke to both new and existing efforts to train additional workers.

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

White House officials see the defiant commitments as the tangible result of three key legislative victories, which laid the groundwork for a dramatic shift in the long-term infrastructure of the American economy. The three – a bipartisan Infrastructure Act, as well as a law boosting US semiconductor chip manufacturing and a comprehensive health care, tax and climate bill of $750 billion – were highlighted during Wednesday’s event and notes.

Still, Biden’s economic team has worked tirelessly for months to find policy options to ease the burden of price hikes, even if hopes of a steady decline in the run-up to the election have been dashed.

While they are very careful not to make economic forecasts, in the spring officials saw a path to a clear slowdown in prices by the fall — something that would have been an important part of their economic presentation as the final weeks of the campaign approached.

Instead, they are stuck staring at the rapid acceleration of Federal Reserve efforts that has rocked markets and some companies’ hiring plans, inflation that remains high and barely moving, and American voters registering outright frustration in large majorities.

Biden’s major policy victories are designed to address many of the pandemic-era drivers of the current inflationary moment – yet all of which will take time to implement – only revealing the frustration many advisers are feeling at the moment they now face.

Biden’s White House legislative achievements are tangible and significant — and officials say the future he predicted is in many ways consistent with proposals Biden has campaigned. Officials point out that the tens of billions of dollars in private investment pouring into the United States only serves to enhance the merits of the effort.

Yet, less than a week after the midterm votes were counted, Biden — and his party — remain at the political mercy of a problem they don’t have the tools to control immediately, as they get caught up in events at the White House that highlight policies that will take hold over time.

Meanwhile, the Federal Reserve – and its dramatic, unrelenting push for months to control inflation – will remain in the spotlight as hesitant Americans make their final electoral choices.

This story was updated with additional developments on Wednesday.

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