Rattner’s “I Told You So”

I found Steve Rattner’s New York Times op-ed, mostly an extended “I told you so”, somewhat puzzling:

Enough already about “transitory” inflation. Last Wednesday’s terrible Consumer Price Index news shifts our inflation prospects strongly into the “embedded” category: Prices are up 6.2 percent from a year ago, the largest increase in 30 years.

While not likely to morph into the double-digit inflation I covered for The New York Times four decades ago, prices may well rise fast enough to trigger higher interest rates. Higher financing costs make it more expensive for consumers and businesses to borrow, which, in turn, throttles growth.

Inflation had already been tagged as a factor in the Democrats’ awful election results this month and in the president’s sagging poll numbers. It also threatens the passage of President Biden’s Build Back Better plan, which includes expansive new initiatives to address climate change, as well as important programs like paid family leave and universal preschool.

concluding:

For the Fed, addressing inflation will mean raising interest rates, perhaps sooner than it thinks necessary. The Fed targets average annual inflation of 2 percent. So if or when the pace of price increases gets stuck far above that level, the central bank will need to raise interest rates to address the problem. While the Fed thinks this won’t happen until late next year, the bond market believes rates will be hiked by midyear.

The responsibility for easing inflationary pressures also lies with the Biden administration. To its credit, it is scrambling to address the supply shortages, doing things like unclogging ports. But other ideas, such as releasing oil from the Strategic Petroleum Reserve, amount to distracting symbolic moves that are unlikely to have a significant effect on inflation.

The White House needs to inject some real fiscal discipline into its thinking. Given the importance of Mr. Biden’s spending initiatives, the right move would be to add significant revenue sources. Yes, that means tax increases. We can’t get back money badly spent. But we can build this economic plan back better.

There are all sorts of reasons for my confusion. For example, although Mr. Rattner attributes the “transitory inflation” trope to the White House, it is rather the White House repeating the claims of the Federal Reserve than the other way around. And fiscal discipline? It has fallen into bad repute on both sides of the aisle. Republicans appear to think that all tax cuts will immediately pay for themselves in the form of economic growth while Democrats are equally one-noted, apparently believing that increasing consumer spending will lift all boats.

My interpretation of the piece is that Mr. Rattner, like Rahm Emanuel, is desperately seeking a place for himself in a party that is rapidly leaving him behind. I think that was the message of the Virginia governor’s election: it marked the decline in influence of the Clinton wing of the Democratic Party. However, it was also a rout for the “social democrat” wing of the party. What’s left? People more interested in getting the garbage picked up and potholes filled. They are likely to be disappointed with the “infrastructure bill” just signed into law by President Biden whose results are unlikely to materialize for several years if ever.