Inflation

Subterms

    More stories

    • 113 Shares169 Views

      in US Politics

      Democrats worry inflation could imperil agenda and congressional majorities

      by

      Democrats worry inflation could imperil agenda and congressional majoritiesRepublicans blame Biden’s spending packages but supporters argue Build Back Better will help Americans pay their bills As recently as this summer, Joe Biden seemed to be taking a “keep calm and carry on” approach when it came to concerns about rising inflation.“As our economy has come roaring back, we’ve seen some price increases,” the US president said in July. “Our experts believe and the data shows that most of the price increases we’ve seen were expected and expected to be temporary.”But now, with inflation hitting a 30-year high last month, Biden’s tone has become noticeably less upbeat.“Everything from a gallon of gas to a loaf of bread costs more,” Biden said in Baltimore earlier this month. “We still face challenges, and we have to tackle them. We have to tackle them head on.”Americans are taking notice of high prices with growing alarm, and their concerns appear to be negatively affecting Biden’s approval rating, which had already been falling in recent months. As the US experiences sticker shock at the gas pump and in grocery stores, Democrats are worried that inflation could imperil their legislative agenda and their majorities in Congress as crucial midterm elections loom next year.While the president and fellow Democrats had previously sought to downplay rising inflation, it has become an unavoidable issue as prices continue to climb. The labor department has reported that prices increased by 6.2% over the past 12 months, marking the most rapid uptick since 1990. Gasoline prices have increased by 49.6% over the past year, while food prices have risen by 5.3%.As prices rise, more working Americans are noticing their bills have become more burdensome. According to a poll conducted by the progressive firm Navigator Research this month, 54% of Americans now say the cost of groceries and gas is a “major crisis”, marking a 17-point increase since September.Republicans have blamed the price increases on Biden’s economic policies, arguing that rising inflation underscores the need to oust Democratic lawmakers in the midterm elections next year.“As Biden and Democrats continue to push for trillions more in reckless spending and higher taxes, skyrocketing prices and a broken supply chain under Biden are crushing American families, workers and small businesses,” said Emma Vaughn, a spokesperson for the Republican National Committee. “Americans will soundly reject Biden’s failed economic agenda at the ballot box in 2022.”There are some early signs that Republicans’ message is striking a chord with voters, as the party looks to take back control of Congress in 2022.An AP VoteCast survey showed that 35% of Virginia voters named the economy and jobs as the most important issue facing the state, making it the most common response. Those voters were more likely to support the Republican gubernatorial candidate Glenn Youngkin, who defeated Democrat Terry McAuliffe by two points in the election held earlier this month.And it’s not just Republicans who are sounding the alarm about price hikes. Senator Joe Manchin, one of the key holdouts in Democrats’ negotiations over their $1.75tn spending package, has said he is hearing more from constituents who are concerned about their gas and grocery bills.“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin said in response to the labor department’s latest report. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”Manchin has previously expressed concern that Democrats’ spending package, known as the Build Back Better Act, could negatively contribute to inflation. In a September op-ed for the Wall Street Journal, Manchin warned against approving more government spending, saying, “An overheating economy has imposed a costly ‘inflation tax’ on every middle- and working-class American.”The Biden administration has sought to mitigate inflation-related concerns about the bill, which passed the House on Friday. The president has repeatedly touted a letter from 17 Nobel laureates in economics, which argued the spending package would “ease longer-term inflationary pressures”.But the bill’s critics say the legislation would not address the inflation happening now and may even cause prices to rise further, urging members of Congress not to approve another large spending package.“We’re not worried about the long-term. We have inflation in the here and now, and this policy will make it worse in the foreseeable future,” said Curtis Dubay, a senior economist at the US Chamber of Commerce, a pro-business lobbying group that opposes the spending package.“The first rule of being in a hole is to stop digging,” Dubay added. “This would keep digging. So they need to not pass it.”Jason Furman, who served as the chair of the White House council of economic advisers under Barack Obama, rejected that argument. “Build Back Better will have a negligible impact on inflation over the medium term,” Furman said. “In gross terms, the total spending is one-tenth as much per year as what we just did this year [with the coronavirus relief package]. Moreover, that spending is paid for.”For progressives, conservatives’ warnings about inflation seem a convenient excuse to quash a bill that they already opposed.Natalia Salgado, the director of federal affairs for the progressive Working Families party, said the legislation would actually help average Americans deal with rising inflation by lowering their healthcare and childcare costs.For example, the Build Back Better Act would establish universal prekindergarten for all three- and four-year-old children. It would also reduce Affordable Care Act premiums and lower drug prices by allowing Medicare to negotiate with pharmaceutical companies.“If we really want to have a discussion about inflation, let’s talk about the many things that this bill is going to help minimize the cost of,” Salgado said. “Folks coming out of this pandemic were already hurting economically. It is economically imperative to pass the Build Back Better legislation.”Democrats in Congress have echoed that message, urging those who are worried about inflation to support the bill.“House Democrats’ infrastructure deal and Build Back Better Act tackle inflation head on through their historic investments,” said Congressman Sean Patrick Maloney, the chair of the Democratic Congressional Campaign Committee. “Rather than working to solve economic problems, Republicans have voted overwhelmingly to block these bills that reduce prices for the American people and focused instead on their own extremist agenda.”But many of the provisions of the Build Back Better bill will not go into effect immediately. The Medicare drug price negotiations will not begin until 2025, and the universal prekindergarten program will be built up over the next few years.In the short term, it may be difficult for Biden to address rising prices. Even if the Federal Reserve moves quickly to stifle inflation, it would take months for Americans to feel the effect of the fiscal policy change. And when it comes to gas prices specifically, Biden has little sway over the global oil market, although he has called on the Federal Trade Commission to investigate “mounting evidence of anti-consumer behavior by oil and gas companies”.“Politically, people are very sensitive to inflation in gasoline prices and food because that’s just a visible item they see,” Furman said. “I’ve been in government when gas prices are going up, and it’s terrible. Everyone hates you.”On the plus side for Democrats, the frequent fluctuations in gas and food prices mean those costs could decrease over the next year even if overall inflation continues to rise, Furman said.That possibility may be Democrats’ best hope for maintaining control of Congress after the 2022 elections. However, if prices do not improve over the coming year, the president’s party may need to brace for an ugly election night next November.TopicsUS economyInflationDemocratsUS politicsanalysisReuse this content More

    • 200 Shares179 Views

      in US Politics

      AstraZeneca’s boss is a boardroom superstar but a potential £2m cherry is pushing the point

      by

      A majority is a majority, but a rebellion of 40% against an executive pay policy is too large to be pinned solely on those brain-dead fund managers who outsource their thinking to proxy voting agencies.At AstraZeneca some serious institutions, with Aviva Investors and Standard Life Aberdeen to the fore, clearly thought the company was pushing things too far by adding a potential £2m cherry on top of their chief executive, Pascal Soriot’s, already substantial pay package. The rebels had a point.Yes, Soriot is a boardroom superstar thanks to AstraZeneca’s success in supercharging the development and production of the Oxford University vaccine for no profit. Communication with regulators went awry at times, and Soriot himself obviously wasn’t getting his hands dirty in the labs. But the boss, even when operating from Australia, is doing an excellent job of standing up to irritating and ungrateful EU commissioners, which is also part of the pandemic operation. And, amid it all, the company didn’t miss a beat on its day job and had time to spend $39bn buying the rare disease specialist Alexion, which looks a promising deal.Yet exceptional effort in an exceptional year is roughly what one expects from a chief executive on Soriot’s pay package. In the last three years, his incentives have performed wonderfully and he has earned £13m, £15m and £15m, so is firmly established in the £1m-a-month category, which very few chief executives of FTSE 100 companies can say. Even for an international hero, it feels a decent whack.The company’s claim was that “the world drastically changed in the last 12 months, and so did AstraZeneca”, and thus adjustments should be made outside the normal three-yearly cycle for tweaking pay.That argument would have felt stronger if AstraZeneca was not already at the adventurous end by UK standards. Last year, Soriot earned 197 times the median pay among his workforce. And, critically, the new arrangement will take his variable pay – annual bonus plus long-term incentives – to 900% of his £1.33m salary. A few years ago 500% was regarded as high by FTSE 100 standards.That precedent-setting detail helps to explain why the rebellion was so strong. Those fund managers who care about controlling boardroom pay inflation saw the risk of knock-on effects elsewhere. Loyalty to Soriot probably swayed a few doubters and helped AstraZeneca prevail, but the company did not need to pick a fight at this time – it gave Soriot a chunky rise a year ago.Some real pay shockers (think Cineworld) have slipped through in recent months. If the wider message in the AstraZeneca vote is that fund managers are not all asleep, that would be no bad thing.Seatbelts on for more stock market turbulenceLast Friday investors preferred to see a silver lining in a weak set of US unemployment numbers – only 266,000 jobs created in the month of April, against forecasts of 1m. If a lack of new jobs implied no inflationary wage pressures in the US economy, at least the stock market could take a few days off from worrying about rises in interest rates, ran the theory.Inflationary pressures, though, come in many forms, and here is a piece of data that spooked the stock market on Tuesday: China’s producer prices index rose at an annual rate of 6.8% in April, up from 4.4% in March.That is the highest level for three years and a sign, probably, that the boom in prices of raw copper, iron ore and other raw materials is finally feeding through to goods. The FTSE 100 index fell 175 points, or 2.5%, following other stock markets down.The benign view says a flurry of higher prices is almost to be expected as the global economy reopens. In that case, central banks’ mistake would be to move too early and choke off recovery. Yet it is clearly also possible that we could be at the start of a big move on prices, with the next leg delivered by the Biden’s administration’s huge infrastructure programme. If so, the mistake would be to delay rate rises.Do not expect quick or clear answers. Inflation data can give mixed messages for months. Do, though, anticipate more bumpy days for stock markets. Investors’ default assumption is to assume the US Federal Reserve will play nicely and look through the short-term signals. Life could quickly get ugly if there is any deviation from that assumed path. More