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Americans blame President Biden for rising inflation; it could get worse.
The administration’s big-spending policies and inability to cure our supply chain woes have driven prices higher. In addition, Biden’s generous handouts and vaccine mandates have pushed workers to the sidelines, making it difficult to fill jobs and raising costs even further.
But it is Biden’s enthusiasm for Big Labor that is going to make matters worse. We are now entering a new phase of inflation pressures. A rising cost of living is pushing workers to demand higher wages, which in turn prompts companies to raise prices even more, igniting an unholy cycle that penalizes everyone.
Unions, cheered on by Biden’s White House, have decided to take advantage of this moment. Labor strikes are on the increase, which will lead to higher wages, take workers offline and make it even harder to get goods to customers. Those bare shelves popping up around the country may just be a teaser for what comes next.
A wage-price spiral is the phenomenon that causes inflation to become “persistent” and not “transitory.” This is what Democrats will bring to the 2022 midterm elections.
A recent Morning Consult/Politico poll found that 62 percent of registered voters, including 61 percent of independents and even 41 percent of Democrats, blame Biden’s policies for soaring inflation. With prices rising at the fastest rate in 13 years, less than half of those surveyed attribute the increase to Americans returning to pre-pandemic behavior.
Though the policies that contributed to price hikes on everything from rents to gasoline to chicken were not specified in this poll, other surveys have found voters pinning rising inflation on Democrats’ big spending programs, such as the $1.9 trillion American Rescue Plan. That is one reason (along with a healthy survival instinct) that moderate Democrats are now slow-walking Biden’s $3.5 trillion “social infrastructure” bill.
Transportation Secretary Pete Buttigieg acknowledged the connection the other day, when he shirked responsibility for port delays and trucker shortages by arguing that we don’t have just a supply problem but also a demand problem.
Buttigieg is correct. With Congress authorizing an unprecedented $5 trillion in “relief” spending over the past two years and with the Federal Reserve pumping trillions into the money supply, the country is awash with money.
Put most simply, there is too much money chasing too few goods.
As a consequence, prices in September rose 5.4 percent from the year before, faster that the growth in wages, which increased 4.6 percent. Over the past year, real average hourly wages are down almost one percent. Workers are falling behind, and they know it.
Unions have taken notice and decided that this is the time to begin rebuilding their ranks among private companies. Only 6.3 percent of private-sector workers today belong to unions, a massive drop from 12 percent in 1990. Clearly, labor leaders would like to reverse that trend. With the nation short of workers, this may be the perfect time to do so.
Just recently, 10,000 United Auto Workers at tractor manufacturer John Deere went out on strike for the first time in three decades, while 31,000 employees at Kaiser Permanente are also staging a walkout. Some 1,400 workers at cereal-maker Kellogg are striking.
All in, there have been 12 strikes of 1,000 workers or more so far this year, according to the Bureau of Labor Statistics, and a total of 178 work stoppages. Those figures are way above 2020 totals, but about the same as in 2018 and 2019.
My guess: We’re in the early innings. Workers are aware that they have leverage, and union leaders know there is a pro-Big Labor president in the White House.
Early in his tenure, Biden posted a message about workers’ right to organize and the virtues of collective bargaining on Twitter that many saw as encouraging employees at an Amazon facility in Alabama to vote in favor of forming a union. It was an unprecedented intrusion by a president into such contests. As it happened, Biden’s push failed when workers overwhelmingly defeated the organizing effort.
President Biden has gone further, inserting into his stimulus bills pro-union items like making union dues deductible and requiring that federal funds flow predominantly to union shops.
As important, he has packed the National Labor Relations Board with former union lawyers committed to advancing the cause. Politico reports that the agency’s expected rulings could “serve as a backdoor for enacting provisions … that would vastly expand workers’ ability to join unions in potentially the most important overhaul of U.S. labor law since the 1940s.” Organizing gig workers is one of the new board’s top ambitions.
The Los Angeles Times affirms: “Biden has put unions at the center of policy — viewing them as vehicles not only to rebuild middle-class jobs but also to address climate change and racial and gender inequity.”
The John Deere workers rejected a contract that would have awarded raises of 5 percent to 6 percent and offered another 3 percent wage hike in 2023 and 2025. Deere’s employees are emboldened by the company’s current profitability and the struggle to hire new employees.
Most likely, workers elsewhere will follow suit. We have not seen a wave of disruptive labor strikes for many years. For the past two decades globalization put a lid on the demands of workers who were wary of shipping jobs overseas, and the Great Recession crimped corporate profits.
Biden’s pro-union efforts could win back some of those blue-collar workers who defected to Donald Trump in 2016, but the president’s encouragement of Big Labor will surely lead to higher wages. Those pay hikes will spur even higher inflation; it will be hard to stop the merry-go-round.
It will also be hard for Biden and his fellow Democrats to escape responsibility for what many voters consider the country’s number one problem: inflation.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.