Biden doesn’t have a silver bullet for inflation, but here’s what he can do

I can’t remember a more difficult, complicated set of factors at play all at once in the economy – with no road map.

Morgan Stanley put it this way on Sunday: “We live in the most chaotic, hard-to-predict macroeconomic times in decades.”

You can see it in the punishing sell-off this year in stocks: The S&P 500 (SPX) is down 16% this year, wiping out a year’s worth of gains. It’s even worse for the Nasdaq (COMP), down 25% this year.

“Market stress signals are high,” UBS warned its clients Sunday.

You can say that again.

The global economy is a mess of crosscurrents, any one of which would be destabilizing on its own. Inflation is running the hottest in 40 years, for a bunch of reasons, including a pandemic that broke global supply chains. That hasn’t been fixed yet.

Shoppers inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022. U.S. inflation-adjusted consumer spending rose in March despite intense price pressures, indicating households still have solid appetites and wherewithal for shopping. Photographer: David Paul Morris/Bloomberg via Getty Images

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Cue the Federal Reserve. After years of ultra-low interest rates, the Fed is aggressively raising interest rates. Despite months of warnings, it’s still a shock for investors and borrowers.

Also broken: the energy world order. President Vladimir Putin’s war in Ukraine is redrawing the oil map, worsening the inflation problem.

Still, the US job market is strong. The jobless rate is near a 50-year low. There are a record 11.5 million open jobs, and wages are rising, especially for job-hoppers.

But polls show inflation and Covid fatigue cancel out any good news.

Americans say they feel lousy about the economy, even though they are spending their money like crazy. Consumers literally can’t find all the stuff they want to spend money on. (There’s that broken supply chain again.)

What can Biden do?

All of this makes it a tall order for the White House to message that fighting inflation is issue number one. The fact is, there is no silver bullet.

Instead, economists say there are a variety of levers the White House can pull, many with drawbacks – and, frankly, you need Congress too.

Among their suggestions: Drop Trump’s China tariffs on some goods. This could be an instant discount for consumers on things like clothes and bicycles. (The US just temporarily lifted steel tariffs on Ukraine.)

Some recommend ending the Jones Act to blunt energy prices. That would allow non-US vessels to carry oil shipments. Others want a national gas tax holiday.

Another option: more immigrant worker visas, to address labor shortages. That would take Congress, of course.

You’d need Congress, too, to expand child tax credits for low-income families grappling with high costs for gas and groceries.

Moody’s Chief Economist Mark Zandi notes that Congress could also get serious on addressing the low supply of rental homes and rent growth, which has been a big driver of inflation.

“Bottom line, inflation will not recede in earnest until we are on the other side of the pandemic, and global supply chains iron themselves out and the economic fallout from the Russian invasion of Ukraine fades away,” Zandi said.

– CNN’s Kate Trafecante contributed to this story.