The White House’s “work is not done” when it comes to lowering prices for American consumers according to the president’s top economic advisor, Lael Brainard. That’s despite the recent slowing of inflation that has seen the headline consumer price index fall to 0.1% in November.
In an interview on the Odd Lots podcast this week, Brainard identified areas and tactics where the administration is continuing to press for lower costs, including reducing prescription drug prices and deceptive “junk fees” on things like hotel stays, where the White House remains actively engaged.
She also said the administration would use its position to “continue calling out corporations who are not passing along cost savings to consumers.” In recent months, President Biden has publicly accused companies of “price gouging” for not cutting prices faster as supply chains recovered and input prices declined.
The role of corporate profits in driving inflation is a hot-button topic for economists, but one that Brainard was exploring even before becoming head of the National Economic Council in February of last year. In one of her last speeches as Federal Reserve Vice Chair, she described how retail markups had potentially contributed to increased prices.
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“We have seen, and you can see it in the data, that when supply chains were snarled and input prices were going up, that a lot of big corporations raised their prices to consumers by as much or more, which meant that their markups went up, which some people have referred to as a price-price spiral,” Brainard told Odd Lots. “And then they come down extremely sharply over the course of 2023, so that they are now back down to levels that we saw pre-pandemic and input costs also have come down.”
“What is really troubling is that corporations need to pass those input cost declines on to consumers so that consumers can see the benefit of that in their weekly budgets,” she added.
Those ongoing efforts to reduce costs aside, Brainard sees an economic success story that has defied expectations after many economists doubted that the US economy would see a reduction in inflation without a subsequent rise in unemployment. Last week, US Treasury Secretary and former Federal Reserve Chair Janet Yellen said the US economy had achieved the proverbial “soft landing” after jobs data came in stronger than expected.
“We are really pleased with how well the economy has performed,” Brainard told Odd Lots. “Under 4% unemployment rate for 23 months in a row, another 2.7 million jobs created over the last year alone, 14.3 million since the beginning of President Biden's time in office,” Brainard said. “And inflation that has come down now to the 2% range — core inflation — over the last six months. If you look at the forecasters a year ago, there was a lot of recession calls and a lot of those forecasters saying you couldn't get inflation as far down as it is today without seeing a lot of unemployment.”
Still, the economic recovery shown by hard numbers has not been reflected in softer survey-based measures. The University of Michigan Consumer Sentiment Index, for instance, remains stuck far below pre-pandemic levels despite some signs of a recovery in more recent months as inflation eased and gas prices fell.
As Brainard sees it, the poor sentiment makes some sense given the massive disruptions to everyday life in recent years.
“It's been a very stressful few years for Americans,” Brainard said, citing the shuttering of small businesses, a surge in layoffs, and the explosion of inflation as drivers of the overall negativity.
But she believes that the positive news will set in with the public. “It may take a little bit of time for Americans to really feel confident, that the good economic numbers that they’re seeing in their own good personal situations is actually going to be sustained.”