Biden’s inflation plan upends thinking on jobs sent overseas

Mar 8, 2022, 10:23 PM | Updated: Mar 10, 2022, 4:03 am

WASHINGTON (AP) — President Joe Biden has a solution for high inflation that seems counterintuitive: Bring factory jobs back to the U.S.

This challenges a decades-long argument that employers moved jobs abroad to lower their costs by relying on cheaper workers. The trend contributed to the loss of 6.8 million U.S. manufacturing jobs since 2000, but it also translated into lower prices for consumers and put downward pressure on inflation in ways that kept broader economic growth going.

It was a trade-off that many corporate and political leaders were privately comfortable making.

Now, with inflation at a 40-year high, the president has begun to argue that globalization is stoking higher prices. That’s because proponents of outsourcing failed to consider the costs of increasingly frequent global supply chain disruptions. Recent disruptions have included the COVID-19 pandemic, shortages of basic goods like semiconductors, destructive storms and wildfires and, now, the Russian invasion of Ukraine, which has sent oil prices soaring.

Biden says the federal government can pursue two courses on inflation. It can either pull back on support and cause wages and growth to cool, or it can get rid of the pressure points that can lead to inflation when emergencies and uncertainties occur by having more goods manufactured in the U.S.

“Making it in America is one of the ways we can address our cost and supply chain challenges,” Biden said Wednesday. “When we build products we need, we don’t have to wait and we reduce shipping costs and we can get goods moving faster.”

The president then unspooled his thinking at a White House event with Commerce Secretary Gina Raimondo, state governors and business leaders. They gathered to stress the importance of finalizing a bill that would commit funds to encourage the domestic manufacturing of computer chips, which was one of the key bottlenecks that led to higher prices for autos, appliances and other goods last year.

After the event, Raimondo said she expects the bill to be wrapped up between now and Easter. She has made the argument to lawmakers that the chip shortage contributed to higher auto prices that boosted inflation last year. Demand for chips continues to outpace supply, a problem unlikely to be resolved any time immediately.

“I think it’s 12 months before it’s where we it want to be,” Raimondo said.

Biden’s plans would take several years to implement and the consumer price report being released Thursday is expected to show that annual inflation rose to nearly 8% last month, according to the financial data firm FactSet.

Biden’s challenge is that he’s got long-term plans on inflation to address pain that consumers are feeling each day, said Douglas Holtz-Eakin, president of the center-right American Action Forum, who described Biden’s plan as “optics.”

“Semiconductor manufacturing facilities take years to build,” he said. “Inflation’s here now, and it’s it’s an issue now.”

Biden’s assertion sets up an ideological battle with Republicans, who blame the president’s $1.9 trillion coronavirus relief package for being excessive and flushing more cash into the U.S. economy than was needed. GOP lawmakers have said inflation — up from recent averages of about 2% — is entirely the president’s fault, while the administration is trying to say the bigger problem rests with the structure of the global economy.

House Republican leader Kevin McCarthy and others said last week that inflation — especially for gasoline — was the key source of the nation’s angst ahead of this year’s midterm elections.

“You don’t need a speech to know what the state of the union is. You feel it every time you go to the grocery store and the gas pump,” McCarthy said on Twitter.

Critics see this new Biden effort as largely an attempt at political damage control, rather than a data-driven approach to reducing inflation.

“It’s primarily about optics,” said Scott Lincicome, director of economics and trade at the libertarian Cato Institute. “The Biden administration clearly knows that inflation is a political albatross. And they are looking for anything and everything to show American voters that they have a plan to fix the problem.”

Lincicome argues that the vast majority of inflation is caused by Federal Reserve efforts to boost growth, Biden’s relief package and the general challenges of restarting an economy after the pandemic. Restoring factory jobs that went elsewhere would not address those challenges and any arguments for that are based on the belief that supply chain disruptions have become a permanent feature of the global economy, he says.

“Global supply chains lower costs and increase efficiency,” Lincicome said. “The idea that reshoring will somehow lower costs assumes a permanent pandemic situation and that’s just not reality.”

The Biden administration, for its part, is making that exact argument — supply chain disruptions are becoming more common and weighing on prices in ways that companies previously failed to consider.

The White House contends that the existing setup of the U.S. economy makes it vulnerable to disruptions that drive up prices. When companies first sent jobs overseas, they failed to fully account for the possible setbacks and challenges that can occur overtime with distant factories.

People were not accounting for increased “risks and disruption, and they weren’t thinking about five-, 10-year horizons,” said Sameera Fazili, deputy director of the White House National Economic Council. “They were looking at minimizing costs over a one-year horizon, two-year horizon.”

The administration is basing its argument, in part, on analyses done by the McKinsey Global Institute. A 2020 report by the institute found that companies will likely experience supply chain disruptions lasting a month or longer every 3.7 years, which increases costs and cuts into profits.

The risks examined in the report range from a “supervolcano” to a “common” cyberattack. There are political risks as well, as 29% of all global trade in 2018 came from countries ranked in the bottom half of political stability by the World Bank, an increase from 16% in 2000.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

This image from video released by the City of Uvalde, Texas shows Texas Department of Public Safety...
Associated Press

Uvalde school hires ex-trooper who responded to massacre

UVALDE, Texas (AP) — A former Texas state trooper who was part of the law enforcement response now under investigation for its actions during the deadly school shooting in Uvalde has been hired by the school district as a campus police officer. Families gathered Thursday outside the Uvalde Independent School District’s administrative office to protest […]
10 hours ago
Associated Press

Polling software CEO given bond, deadline to surrender in LA

The founder and CEO of a Michigan software company targeted by election deniers accused of stealing data on hundreds of Los Angeles County poll workers has been ordered to report to California authorities by the end of next week. Konnech Corp,s Eugene Yu, 51, was arrested in Meridian Township in Michigan on Tuesday and a […]
10 hours ago
FILE-- A sign reading "Gun Free Zone" is posted near around Times Square, Aug. 31, 2022, in New Yor...
Associated Press

Federal judge halts key parts of New York’s new gun law

ALBANY, N.Y. (AP) — A federal judge halted key provisions Thursday of New York’s latest attempt to restrict who can carry a handgun in public and where firearms can be brought, saying multiple parts of a law the state passed this year are unconstitutional. U.S. District Judge Glenn Suddaby focused on multiple parts of the […]
10 hours ago
University of Arizona Police escort students from the scene of a shooting at the John W. Harshbarge...
Associated Press

Police: Ex-grad student kills Arizona professor on campus

TUCSON, Ariz. (AP) — The University of Arizona has released the name of a professor who authorities said was fatally shot on campus by a former graduate student. University President Robert Robbins identified the victim late Wednesday as Thomas Meixner, who had headed the school’s Department of Hydrology and Atmospheric Sciences. Police said Meixner was […]
10 hours ago
Gas prices are displayed at a gas station in Frankfurt, Germany, Wednesday, Oct. 5, 2022. A cut in ...
Associated Press

EXPLAINER: How will OPEC+ cuts affect oil prices, inflation?

FRANKFURT, Germany (AP) — Major oil-producing countries led by Saudi Arabia and Russia have decided to slash the amount of oil they deliver to the global economy. And the law of supply and demand suggests that can only mean one thing: higher prices are on the way for crude, and for the diesel fuel, gasoline […]
10 hours ago
Associated Press

Man charged with smuggling pythons in his pants at US border

ALBANY, N.Y. (AP) — A New York City man has been charged with smuggling three Burmese pythons in his pants at a U.S-Canadian border crossing. Calvin Bautista, 36, is accused of bringing the hidden snakes on a bus that crossed into northern New York on July 15, 2018. Importation of Burmese pythons is regulated by […]
10 hours ago

Sponsored Articles

...
Children’s Cancer Network

Children’s Cancer Network celebrates cancer-fighting superheroes, raises funds during September’s Childhood Cancer Awareness Month

Jace Hyduchak was like most other kids in his kindergarten class: He loved to play basketball, dress up like his favorite superheroes and jump as high as his pint-sized body would take him on his backyard trampoline.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
...
Dr. Richard Carmona

Great news: Children under 5 can now get COVID-19 vaccine

After more than two years of battle with an invisible killer, we can now vaccinate the youngest among us against COVID-19. This is great news.
Biden’s inflation plan upends thinking on jobs sent overseas