‘Senior White House officials were surprised at how serious the inflationary problems are throughout the economy.’ Great, just great.
The first ten months of the Biden administration have brought more than their fair share of unnerving revelations, reports, and rumors, but this line in a Washington Post story from Wednesday is a giant flashing neon sign that this White House is every bit as out of touch as you fear: “Senior White House officials were greatly disappointed by Wednesday’s report and surprised at how serious the inflationary problems are throughout the economy, according to people familiar with the matter. The report also fueled mounting concerns about supply chain bottlenecks.”
Surprised? We’ve been seeing building and worsening signs of increasing inflation since at least early summer, if not earlier. It’s bad enough if the president runs around insisting no serious economist believes there is unchecked inflation; it’s worse if the president and his staff actually believe what they’re saying.
Yesterday, Jason Lahart of the Wall Street Journal pointed out that there’s little reason to think inflation will subside at all until at least January at the earliest:
There are risks here. One would be that this period of higher inflation has worked its way into consumer expectations to the point that it will be to some degree self-perpetuating. Another would be that the tightness in the labor market won’t dissipate, with many of the people who left the workforce during the pandemic permanently on the sidelines.
For now, however, the big issue is that supply constraints haven’t gone away, and with the holidays approaching, the economy has entered the season of peak consumer demand. It won’t be until the first quarter, when demand for consumer goods is much lower, that supply constraints might ease. If inflation looked hot in October, just imagine what November and December might bring.
Regarding consumer expectations, a friend recently shared this observation:
“The last few weeks when I’ve gone to the supermarket, I’ve seen empty shelves for some things I was looking for. And when I paused a moment to decide what to do, I would think, ‘is this lack of workers to fill the shelf, or is it a supply chain problem, or is this the first sign of hoarding? Or is it some combination – and what comes next?’
In other words, it’s the uncertainty that has me worried. None of these things is any kind of major problem, but Biden isn’t fixing any of them any time soon. In fact, he might make any one of them worse at any point – that’s more likely.
Toilet paper hoarding [at the start of the COVID-19 pandemic] was no big deal. But the confluence of several problems now – without even getting to the topic of inflation – it has me spooked.”
Stores sell out of a particular goods all the time, but about ninety-nine times out of a hundred, the store has restocked its supply of that good by the time you go back on your next visit. But if you go to the store twice and both times they’re out of something you wanted or needed, you notice, and probably don’t forget. Then the next time you go and see they do have it in stock, you might buy more than you normally would, because you don’t know if they’ll have it when you run out. (That is, assuming you can afford to buy more, with the price now higher because of inflation.) And if a store is out of a particular item three visits in a row, if that item in stock on your fourth visit, you’re definitely going to grab it, and you’re really likely to buy more than you usually would.
In other words, each passing month of the supply chain crisis increases the odds that any given consumer will hoard hard-to-find goods, turning inflation and supply shortages into a self-sustaining cycle. Unfortunately, the supply chain crisis and inflation are likely to get worse before they get better. The next few months will probably surprise the administration, too.