Joe Biden has called for corporate America to raise wages for workers as rising inflation and supply chain bottlenecks create “bumps in the road” for the US economic recovery.
The US president’s appeal came during a visit to the industrial city of Cleveland, Ohio as he prepared to unveil on Friday a $6tn White House annual budget that incorporates sweeping plans for large-scale government investment.
Biden made the trip to defend the administration’s economic record and rebut Republican criticism that higher prices and labour shortages because of strong fiscal support were overheating the economy and stalling the recovery.
“You can’t reboot a global economy like flipping on a light switch. There’s gonna be ups and downs in jobs and economic reports. There’s going to be supply chain issues and price distortion on the way back to stable, steady growth,” Biden said. “But this is already clear: we’re on the right track.”
The White House sees salary increases as a solution to the current misalignments in the labour market — with some businesses struggling to fill job openings despite millions of people still out of work — as well as a way to help low-wage households keep up with higher inflation.
“Rising wages aren’t a bug, they are a feature . . . Instead of workers competing with each other for jobs that are scarce, we want employers to compete with each other to attract workers,” Biden said.
“Corporate profits are the highest they’ve been in decades, and workers’ pay is the lowest it’s been in 70 years. We have more than ample room to raise workers’ pay without raising customer prices,” he added.
The Biden administration’s confidence in its economic strategy has been challenged in recent weeks by data showing an unexpected surge in consumer prices in April, coupled with unexpectedly sluggish job growth.
This has triggered an onslaught of criticism from Republicans that excessive spending was bringing the US back to the stagflation era of the 1970s. Many businesses — and Republican lawmakers — believe overly generous fiscal support for households is to blame for holding back workers from re-entering the labour force while inflation threatens to spiral out of control.
Senior administration officials have countered that the disruptions to prices could be resolved relatively soon.
“The recent inflation we have seen will be temporary, it’s not something that’s endemic,” Janet Yellen, Treasury secretary, told members of the House of Representatives appropriations committee on Thursday. “I expect it to last several more months and to see high annual rates of inflation through [to] the end of this year.”
Biden also suggested the White House would take additional action soon to try to relieve some of the supply chain struggles that were driving up prices amid soaring demand, “starting with the construction materials, and transportation bottlenecks, building off the work we’re doing on computer chips”.
After this year’s jump in economic activity, the Biden administration is ploughing ahead with plans for additional investment worth $4tn over a decade — in both physical infrastructure and social spending — in addition to almost $2tn in short-term stimulus to power the long-term recovery and correct what it views as big structural flaws in the US economy.
Those plans are expected to be laid out in Friday’s budget, along with the tax increases on companies and wealthy Americans proposed to finance the plans.
But Biden’s hope for enacting those plans are hanging on delicate negotiations with both Republicans and Democrats on Capitol Hill.
Whether Biden’s economic policies are deemed a success or failure could be crucial to Democratic hopes of maintaining or expanding their majorities in Congress in next year’s midterm elections. In a memo on Thursday, Mike Donilon, a White House adviser, said that based on polling he believed the public supported many of the president’s proposals, even in the face of growing Republican opposition.
“When Republicans criticise the president’s plan to rebuild our economy through long-overdue investments in our country’s infrastructure, they’re criticising what their own constituents have been urging for decades,” he wrote. “When they attack the president’s plan to make the wealthy finally pay their share of taxes, they’re attacking the American people’s basic sense of fairness.”
Source: Economy - ft.com
