With the US being months into skyrocketing inflation and record-high gas prices, the presidential political agenda is facing the harsh reality of gasoline costs varying between an unprecedented $4-6 per gallon and inflation surpassing 8%.
According to President Joe Biden, the main reason behind the economic hardships faced by his country is Russia's military operation in Ukraine. However, it seems that this explanation is becoming more and more feeble.
Addressing the soaring inflation on Wednesday, Federal Reserve Chairman Jerome Powell did not agree with claims that Russian President Vladimir Putin is somehow responsible for the US' economic struggles. Powell reminded that inflation rose in America long before the start of Moscow's military operation in February 2022, exceeding 7% by December 2021.
"[The] inflation was high before — certainly before the war in Ukraine broke out,” Powell said.
He went on to note that inflation is being influenced by a number of factors, and while the aftermath of Russia's military operation in Ukraine is among them, "the problem hasn’t sprung out of nowhere".
Powell recalled that inflation, which was 8.6% for the 12 months ending in May, has been rising since January 2021, when it was only 1.4%. By December 2021, it had soared to 7%; it has gained 1.6% over the past months. As the inflation continued to rise, Republicans heavily criticized Biden for his "spending spree" aimed at implementing his Build Back Better agenda, warning that increased spending in favor of the president's multibillion package would result in inflation.
Gas Tax Holiday? Not so Fast
Amid the inflation, one of the most acute issues for Americans is soaring gas prices. Since January 2021, gasoline prices have risen from about $3.30 to around $5.10.
Most recently, Biden has offered a plan to suspend the federal gas tax in order to reduce fuel costs for customers. However, The Washington Post cited some top Democratic allies of the president as saying the idea was questionable at best, and divisive and ineffective at worst.
The gas tax holiday aspiration has not only raised concerns among the members of both parties, but also within the Biden administration, with officials believing the initiative to be of little use in significantly lowering gas prices for Americans.
Among those doubting Biden's proposed solution for the skyrocketing gas prices are top Treasury Department officials including Janet Yellen, "at least two top White House economists", as well as House Democratic leaders such as Nancy Pelosi and Majority Leader Steny H. Hoyer.
“[Rep. Peter A.] DeFazio … [Speaker Nancy] Pelosi, myself, we’ve all expressed reservations about it. But the president of the United States has proposed it,” said Hoyer, adding that they will have to "look at it."
Treasury officials, in their turn, express concerns that Biden's strategy is "not optimal [...] to tackle the inflation", while its "political benefits are likely to be quite limited."
Even Biden's Treasury Secretary Yellen did not show much enthusiasm about the gas tax holiday initiative, reminding that the measure might work on the state level, but not at the federal level.
“A number of states in the US have cut their gas taxes, and I think the research suggests that there is reasonably high pass-through when a state does it to prices at the pump — not full, but reasonably high,” she explained. "At the federal level, we have a lower gas tax than at the state level. The evidence is more mixed."
A Stab in the Back From... Obama?
Biden's idea was criticized as long ago as in 2008 by none other than his former boss Barack Obama. At the time, he called a gas tax holiday nothing short of a "gimmick" designed more to gain votes, while not actually relieve the pain felt by Americans at the pump.
This is a rare case when Republicans are agreeing with Obama, as the GOP has slammed Biden's gas tax holiday idea as an election-year political stunt.
“This ineffective stunt will join President Biden’s other ineffective stunt on gas prices: emptying out the Strategic Petroleum Reserve that we need in the event of a true national security crisis,” Senate Minority Leader Mitch McConnell said.
Who's to Blame?
Over the recent months, the US and other Western countries that sanctioned Russia for its military operation in Ukraine have experienced record spikes in prices and inflation, with energy bills in Europe and America increasing up to this day.
Biden, however, is adamant that should all his propositions, from gas tax holiday to increased oil production, be implemented, it would help Americans save as much as $1 at gas stations. Despite the growing concerns among his own officials, he does not seem willing to abandon the "Putin's price hike" mantra.
Voters also don't seem to buy it, with Rasmussen Reports poll showing that the majority of Americans (52%) laid the blame for high costs on President Biden himself, with only 11% of respondents blaming Putin for spiking gas prices in the US.
Moscow, in turn, has repeatedly pointed out that the reason behind the economic hardships currently faced by the Western countries are in their own poor political and economic decisions - particularly those related to anti-Russian sanctions.
The move to sanction Russia over its military operation in Ukraine has resulted in soaring inflation in Euro area (in May 2022, it reported the annual inflation of 8.1%), as well as in the United Kingdom (its annual inflation eclipsed 9.1%), and Canada (it reported 7.7%).