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Brian Lehrer: It's the Brian Lehrer Show on WNYC. Good morning, everyone. The April inflation numbers came out this morning with economists expecting the rate of increase to ease to some degree. As it turns out it eased only a tiny, tiny bit. The pace is still at more than 8% a year. Bloomberg News analyzes it this way. It says, "Leading the way with some basic things like food, shelter, and new cars, airfares are spiking as well. Michael Hill reported seeing $5 gasoline for the first time in this wave in New Jersey this week, an example of something that's not a necessity.

Papa John's Pizza is reported going up by about 7% of pie, not sure about the toppings. On something that is a necessity, there's a baby formula shortage. Maybe some of you are listening at this hour because you're a stay-at-home parent and you know this all too well. The stock market has been taking a beating so far this year. The NASDAQ with all those tech stocks is down a whopping 25%. The broader S&P 500 is off by 16%.

At the same time, new unemployment insurance claims have just hit their lowest level in more than 50 years. Almost everybody who wants a job can find one and wages for regular jobs, not just the elite ones, are rising for a change. Politically, inflation has been the central economic concern Americans have been focused on. In recent public opinions in this election year, President Biden yesterday saw to direct the blame as he identified and empathized.

President Biden: Look, I know you got to be frustrated, I know. I can taste it. Frustrated by high prices by gridlock in Congress. By the time it takes to get anything done, believe me, I understand the frustration, but the fact is congressional Republicans, not all of them, but the MAGA Republicans are counting on you to be as frustrated by the pace of progress which they've done everything they can to slow down.

Brian Lehrer: We'll hear more of the president's argument shortly, but what's going on, and what's the bigger picture. With us now, Greg Ip, chief economics commentator for The Wall Street Journal. His latest article was called The Postpandemic Normal Is Here and It Isn’t That Special. Greg, thanks for coming on in the midst of all this. Welcome back to WNYC.

Greg Ip: Thanks very much for having me, Brian.

Brian Lehrer: To start with this morning's news, the rate of inflation as measured by the consumer price index stayed pretty constant last month, economists were hoping it would be a little better than it was. What's important in these numbers as you look at them since the release in the 8:00 AM hour?

Greg Ip: The good news such as it is, is that the inflation rate did actually go down. It was 8.5% in March. It came down just a tad to 8.3% in April. Unfortunately, when you dig below the surface, there's not a ton of good news there. If you look at just the change between the month of March and the month of April, it was still a pretty strong increase, which tells us that we are still some ways away from seeing the overall inflation rate trend back to that 2%-3% level that we had before the pandemic.

There are a lot of special things going on below the surface, a big factor behind the April numbers was airfares, which rose, I think they're up to something like 18% year on year. If anybody has tried to book a trip lately, you know there are just enormous problems with staffing, with availability of equipment, and so forth. Hopefully, that's the kind of thing that does not portend more severe inflation in the months ahead.

Brian Lehrer: Some of the other specifics, why is grocery store food going up? Why is pizza chain pizza going up? We don't get our food off container ships from China, do we?

Greg Ip: If you talk to the manufacturers and the restaurant chains that supply us with the groceries and the pizza, they'll cite a number of factors. The raw materials for food have gone up. There has been a squeeze on commodities around the world, which has gotten worse with Russia's invasion of Ukraine, which as you've probably heard is a major wheat exporter. There's shortages of labor everywhere, and that includes, for example, the slaughterhouses that prepare packaged meat, which is one of the biggest sources of food inflation, and among restaurant chains.

A lot of these chains and restaurants laid off most of their workers at the start of the pandemic. Now that everybody wants to go ahead and eat again, the restaurants have trouble finding the workers that were laid off and so they're short of staff, both cooks, waiters, and so forth. A lot of them can't even keep the restaurants fully open. To get the workers they need they're paying a lot more for them, that has to be recovered somehow, and you're seeing it show up in the prices that you pay.

Brian Lehrer: Why is housing going up? We always talk about the chronic housing shortage in New York and the particular conditions of New York City housing. What's the national picture?

Greg Ip: Your listeners in New York may not realize this, Brian, but New York is actually a relative bright spot so far as the price of housing in New York is up, but it's not as up as much as it is elsewhere in the country. There are several factors going on. One is that there's a lot of demand and that demand comes from two sources. First of all, up until a few months ago, we had historically low market rates. That obviously made it very appealing to own rather than rent, and that created a surge in interest in buying homes.

Secondly, the pandemic triggered a change in people's desires about how and where to live. We've had a big Exodus from big cities like New York, like San Francisco to less populated areas, and so you see prices in places like central Florida now going up 30% year on year. The other thing is happening on the supply side is that builders are struggling to finish homes. They like the supermarkets and the food chains are struggling with lack of labor, lack of parts. Apparently, it's very hard to find things like garage doors and therefore to finish the homes. It's the same old story, Brian, lots and lots of demand and constraints on supply.

Brian Lehrer: What's happening with baby formula?

Greg Ip: That one is a mystery, Brian. I don't think I have a really good answer for it and it's small comfort that apparently industry doesn't have a good answer for it. What we hear is that there are supply chain issues and some of the ingredients that go into baby formula come from overseas, and they've been slowed down by the tie-ups and slow-downs we hear about, for example, in container shipping.

Apparently, people have moved around a lot during the pandemic, and so some of the brands that people like are not in the places that they want to buy them, and so there's distributional issues. There was a recall associated with one of the major manufacturers and that has temporally reduced supply, but this is one of those mysterious things where the supply chain is so complex that it's hard to come up with a single good answer for why there's such a shortage of it, but boy, it sure is frustrating and distressing if you've got a baby who really needs a particular brand of formula.

Brian Lehrer: If Greg Ip doesn't know then I don't know who knows, but listeners, we're going to do a full segment just on the baby formula shortage on tomorrow's show. Heads up on that, if this is a concern for you or anybody you know. We'll do a segment on the baby formula shortage specifically and dive as deep as we can and try to get some real answers and also help you cope on tomorrow's show.

Let me also put out a call for listeners right now who want to call in. Folks, where are you feeling inflation most in your life or business? Or where are you feeling it most surprisingly? 212-433-WNYC. 212-433-9692. Also, you can say who you blame and if there are any policies you would like to see pursued 212-433-WNYC. 212-433-9692, or tweet your question or comment @BrianLehrer with Greg Ip economics commentator for The Wall Street Journal.

Greg, you've reported on the lockdown in Shanghai and elsewhere in China, as they try to stay close to COVID zero over there, the opposite of the living with COVID approach, the US is taking now. There's certainly an economic toll on people leaving people living in China. Is China's approach affecting prices here?

Greg Ip: It's certainly possible. Shanghai, one of the biggest city in China, is also the largest port in China, one of the largest in the world. The lockdown has affected the efficiency with which cargo is moving from China through that port. It hasn't come to a halt altogether, but it certainly has slowed things down. That said, when you talk to, for example, the people that operate the ports on the west coast of the United States, they have not yet seen a big disruption in products coming into the west coast ports. The folks in China know that China seems to have turned the corner on COVID.

A lot of the cities that had lockdown because infections are rising, they have gotten infections back down to the pre-Omicron level and the reopening. In a little bit of time, hopefully, most of those problems will go away, but I think that this points to a larger problem, something that I wrote about in The Wall Street Journal a little while ago. That it's not just China, but if you look at, for example, COVID in general, if you look at the increased trade tensions and protectionism, whether it was the trade wars that Donald Trump started, or President Biden's Make it in America plans or Russia's invasion of Ukraine.

We seem to be living in a new era of supply shocks of disruptions to the global system, an integrated system of moving goods and services around. What I worry about is that whether it's COVID zero in China, or whether it's Ukraine, we're going to have these on a regular basis in the coming years and it's just going to create an ongoing inflationary backdrop.

Brian Lehrer: Turning to the longer-term, your article is called The Post-Pandemic Normal is Here and it Isn't That Special. What do you mean by isn't that special?

Greg Ip: I was aiming that article at people who drove up the share prices of companies like Teledoc and Amazon, Shopify, and Netflix to the moon because they thought that in this new post-pandemic normal nobody would ever go to a store again or a theater again and that they would only see their doctor over Zoom. It turned out that's not really true. Yes, we are spending more money online and we are watching more Netflix but it turns out that no tree goes to the sky and no trend goes on forever.

What we have seen in the last few months is that as the Omicron wave subsides and people with vaccinations and boosters feel much more comfortable going out in public, a lot of our pre-pandemic habits are returning. We've seen a leveling off of the number of people who telework. We actually, AMC one of the country's largest operating theaters has announced that they're actually doing really well with a strong quarter of ticket sales. Brick and mortar stores are amazingly telling us that people are coming back into the stores. Even gyms. It turns out that people are once again willing to sweat next to total strangers in the gym.

That's bad news for Peloton which was trading at billions and billions of dollars of market value on the premise that everybody would turn their spare room into a gym. What we're seeing in the market right now is what I call a reality check. Yes, some things have changed but not everything.

Brian Lehrer: We see Netflix share's down 70%. PayPal is down 70% I guess as people return to spending in-person. Peloton as you say which makes their home exercise equipment down more than 80% from last year's highs. Even Zoom has shed its pandemic year again you write. Those are really eye-popping numbers. Do they give us a warped view of how bad the stock market is right now? Because they had gone up so high when people thought this was going to be more permanent?

Greg Ip: I definitely think it's part of the story about why the stock market is struggling so much. There's basically two things going on in the market. There's a reevaluation of some of these concept stocks like Netflix, like Tesla that had basically gone to the moon and people are saying maybe we shouldn't have been paying these nosebleed prices for these stocks and they're coming back to earth. In and of itself is not something to worry about in an aggregate sense but we are also seeing the federal reserve raising interest rates to deal with our inflation problem.

We're seeing ever-so-small hints that the economy might be slowing down. The broad market is responding to that, higher interest rates possibility of an economic slowdown.

Brian Lehrer: Yet you said the world has been transformed by a certain amount of apparently permanent adoption of some of these products and services. Certainly, Zoom for example I would think since we see numbers from Crain's New York for example that only 8% of Manhattan office workers are there in person on any given day, and hybrid schedules seem to be settling in as the new normal. How would you characterize the transformation from an economic standpoint?

Greg Ip: I would say that we are doing certain things differently and we will from now on. That is really true of every economic transformation through history whether it was the arrival of the radio in the '20s or television in the 1950s or the spread of the automobile, the creation of the suburbs, electrification. All these technologies and transformations did change our lives and often made them better. There is a distinction between how much they change our lives and how much you should be willing to pay for the companies that are carrying out that transformation.

In almost every one of the episodes that I just described, there was a company or a group of companies that investors just got way too excited about and eventually, they came back to earth. Then that's more or less what you're seeing right here but that should not take away from the fact that a lot of things really are going to be different. People probably are going to be working from home a lot more in the future than they used to. People will be using Amazon and Netflix and other streaming services more than they used to. The things that they used to do will still be around, we'll just have a wider menu of choices ahead of us.

Brian Lehrer: Here is Shino. Am I saying your name right? In Bayshore. Shino, I'm sorry. Hi, Shino in Bayshore. You're on WNYC. Hello?

Shino: Hello, Brian. How are you? Good morning.

Brian Lehrer: I'm okay. You have--

Shino: Good morning to your guest as well.

Brian Lehrer: You have a report on the price of eggs I see.

Shino: Absolutely, Brian. That occurred to me literally about two weeks ago. I went to my local stop and shop and I found out that first, the first quantity: the availability of eggs was less and the price doubled literally and figuratively doubled in price. I have two elderly ladies at home that their staple breakfast comes with eggs. I looked at it the way I saw it is if the price of eggs can go that astronomical, I don't think chickens have reduced in quantity, it's just something has gone wrong somewhere. That gives credence to your guest's analogy in terms of the supply chain is broken. The supply chain being broken is causing the price of things to go astronomical. That's the way I see it.

Brian Lehrer: Shino thank you very much. Call us again please. Greg is there an egg shortage that you're aware of?

Greg Ip: Actually, no. In fact eggs are one of the few things that we don't hear of a lot about shortages. I'm very sorry to hear about the caller's experience but it seems to be worse than average. I just looked up the data and the price of poultry fish and eggs- They don't have an index here for eggs alone. -is up about 20%-25% since the pandemic, that is definitely-- That's not a doubling but it's definitely not very pleasant. Meat is actually a worse situation because as I mentioned earlier there seems to be a much tighter constraint on the supply of meat. In fact, the Biden Administration has been arguing that that's because the meat packing industry is more concentrated. They have a degree of monopoly power that enables them to keep prices higher.

Brian Lehrer: Mariana in Brooklyn, you're on WNYC. Hi, Mariana.

Mariana: Hi Brian. It's such an honor to be on your show. I wanted to come on today and just briefly comment about I work behind the counter at a little artisanal bakeshop. Recently, we've had to raise our prices and though they source almost everything locally or within the USA as we know how inflation works it's still touched and affected. I have to say the most frequent question that I really get is like, "Oh, the prices have gone up. I wonder why that is."

You don't think that you're going to have to talk about economics in a bakeshop. Having to talk people through, "Oh with what's been going on in the Ukraine and what's been going on with inflation in general." It's just something that I've encountered in my daily life in a way I didn't expect. Definitely related.

Brian Lehrer: Mariana, thank you very much. You call us again too. Gus in College Point, you're on WNYC. Hi, Gus.

Gus: Hi. How are you, Brian? Thank you very much for taking my call and I appreciate all the information you're giving us. I'm calling because yes, I have seen how prices are going up. Yesterday I paid $4.69 cents per gallon to fill out my car and that's cheap. I drove around and somewhere up to $5 there was one that was $5.18 for regular gas. Prices are going up for bread, for all the consumables. Sometimes with two bags of groceries, I spend close to $100. This is getting worse.

My raise was only 1.10%. I had not received a raise in over two years from the company. Meanwhile, I hear my company all these stockholders are making very large profits and the company is very happy that we made hundreds of dollars in profits but it's not reaching us. That is going to get just worse. We hear how there are provinces in Ukraine with gasoline but then again we hear also that billionaires are making a lot of money. What's going on? That's basically it. Thank you, Brian. I appreciate it.

Brian Lehrer: Thank you very much. I appreciate it. There's the global frustration of a lot of people, Greg expressed by Gus in all those different areas of the economy that he just mentioned in addition to the other callers and the specific things they brought up. He didn't quite put it this way but he had a whiff of price gouging in that call. That's one of the things that President Biden brought up yesterday. It's hard for consumers to know when there's just a real supply chain shortage or some other pressure that's forcing places to rise prices maybe like Mariana behind the counter as a barista. Maybe some companies are really taking advantage. How do we know?

Greg Ip: I don't think it's easy to know. I'm not going to dismiss those suspicions because as inflation has gone up, corporate profit margins are really quite good. That is in fact the evidence you would see if companies were raising prices more than they had to simply because of higher costs. Now, there's a distinction between companies being able to raise prices and make a lot of profits and then being able to do that because they have an unfair monopolistic position in the market.

This is the difficult thing to disentangle. Let's look at one particular product where prices have gone up a lot, used cars. I think the prices are up something like 30% or 40% since the start of the pandemic. We know for a fact that the used car market is very fragmented, there is no monopolistic seller of used cars. In fact, millions of people sell a car every year and they're enjoying in some sense these windfall profit gains themselves as individuals because there's such a shortage of used cars and such a demand for it.

We can say with some confidence, that is not in fact what's going on here. On the other hand, we talked about meat a minute ago. There is only a handful of meatpackers, and I don't think we can dismiss the possibility that those companies are taking advantage of this squeeze right now to make extra profits.

Now, Brian, I just wanted to take a minute and correct something I said a few minutes ago. I think in response to one of your earlier callers, I said that eggs had gone up less than meat. I just was able to check some recent figures in fact, I was incorrect. Eggs have gone up more than meat. Eggs are up about 22% in the last 12 months, and meat is up 13%.

Brian Lehrer: I think Derek on the Upper West Side has a theory as to why. Derek, thanks for calling in you're on WNYC.

Derek: Thanks for taking my call. I'll make it quick. Duane Reade/Walgreens, I shop there regularly, they have a big store at 72nd Street in Broadway. The two-pack of, let me see if I can read this right, it's a cage-free, hard-cooked, peeled eggs. They basically boil eggs without the shell. Before the pandemic, 99 cents for the two-pack. After the first year of the pandemic, or during the first year, they went to $1.39. Yesterday, $2.49. That's my story.

Brian Lehrer: Thank you very much. I think you were going to mention something about avian flu and sure enough, we just looked it up because you were on hold planning to say that, and we have a Washington Post article saying, "At least one culprit for the price of eggs going up appears to be avian flu." There's some more on eggs, Greg. I don't know if you want to add anything to that.

Greg Ip: [laughs] Yes, of course, I didn't know that I would have to have an opinion on the price of eggs today.

[laughter]

I think that it goes back to something I was saying earlier, there's just a lot of things going on at the same time. It isn't just the pandemic and the residual shortages of labor, but there's a lot of stuff going on in the world today, whether it's avian flu. We're also seeing a lot of countries taking actions on their own, which are helpful to themselves, which end up making the rest of the world suffer. For example, in Indonesia, palm oil is very important for cooking to a lot of families, but Indonesia is also one of the world's largest exporters of palm oil.

In order to hold the price down at home, the government of Indonesia has banned the exports of palm oil. In some sense, they're going to keep prices at home, but the result will be higher prices abroad. Even unbeknownst to us, it may be that some of the higher prices we're paying today reflect those individual actions by other countries.

Brian Lehrer: By the way, Derek, if you're still listening after your call about eggs, my producer, Mary says, "Got to boil your own eggs, Derek. That'll probably be good for health and safety as well as buying them before they're cooked." We're going to continue in a minute with Greg Ip from The Wall Street Journal on the various strands of things that are going on with the economy and more of your calls. Stay with us.

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Brian Lehrer on WNYC with Wall Street Journal, chief economics commentator, Greg Ip, as we talk about the many strands of things coming together for this unusual and fraught economic moment. Greg, you're right that there are parallels with the dot-com bubble that burst in 2000. Can you remind us of the late '90s? Probably a lot of people who lived through them wish it was still the late '90s when the economy looked so good in so many ways, and the federal government actually ran a surplus, not a deficit for a few years. On the surface, that feels very different to me than these pandemic years of massive unemployment from shutting down the economy and massive government spending to help people get through it, and now this inflation.

Greg Ip: May I also add that back then Russia was our friend, remember?

Brian Lehrer: For 10 minutes.

Greg Ip: Yes, I know. I think the parallel I was trying to make there was that like the dot-com bubble was basically about a transformation from a new technology, the internet was brand new at the time. As we were talking about earlier, people thought this would change their lives and they were right. They just were wrong about how much we should pay the companies to do that, and that eventually burst. What was interesting was that the bursting of that bubble helped speed up a slowing in the economy, and then of course, in the fall of 2001, we had the 9/11 terrorist tax, and those pushed the economy over the edge.

I can imagine that there might be parallels to the present where we have both a deflation of this stock market bubble, making people feel less wealthy, perhaps trimming employment at the margin. Then we have a variety of other shocks, including the rise in the cost of energy from Russia's invasion of Ukraine also hitting consumers hard. I will say though, that we don't see a lot of signs of it yet. The economy still seems to be pretty strong, consumers are spending a lot of money, job growth is very strong.

We need to look ahead. I think that as things are on the inflation front now, there are a lot of reasons to think that it will not be so bad a year from now. I mentioned that a big factor to today's inflation was airfares. They're not going to keep going up 18% per year, used car prices aren't going to keep going up 30% per year. We've already seen that on the labor cost front wage growth seems to have stabilized.

If you look at the financial markets, if you look at the people who forecast for a living, they're telling us the inflation rate in a year from now will be 3% or 4% instead of 8%. Now, that's a lot better and it's going to make people feel better, but it's still not acceptable in the sense that the federal reserve wants inflation rate to be 2%, so that doesn't mean their work is done, but the point I'm trying to make here is that if there's an old saying, if something that's unsustainable, it will not be sustained. Some of these price increases I don't think are sustainable.

Brian Lehrer: Michael in Chester in New Jersey, you're on WNYC. Hi, Michael.

Michael: Hi. How are you doing, Brian? Thanks for taking my call.

Brian Lehrer: Good. You're not in East Chester, you're not in West Chester, you're in Chester.

Michael: That's right. I'm in Chester. I was calling this morning because I wanted to bring up hoarding in terms of the formula shortage. I had a comment and then I had a question for your guest. My comment is in response to a guest you had a couple weeks ago who was making a public health policy argument against Lena Winn's positions. He was basically saying that we need a societal and a cultural change in terms of public health, and we need to look at it in terms of self-sacrifice for the common good.

I realize that it's very Pollyanna to expect or even advocate something like this in our current society, but I wonder if that's not something that we should be talking about in this country from the perspective of inflation and specifically with shortages of baby formula. I have a seven-month-old and it's very, very scary to find out that you may not be able to find formula in the coming days or weeks.

What this leads to is some very real panic hoarding. I just wanted to make that comment that maybe that's something that we should talk about where instead of hoarding for ourselves, we think about what is it for other families who have to go through the same thing. My question for the guest was, can you speak to how we measure the impact of consumer behavior in these kinds of shortages, where hoarding goes on, how that actually infects the broader meta-level of inflation?

Brian Lehrer: Great question, Michael. Thank you very much. Greg, hoarding? I don't know if people are hoarding. Certainly, at the beginning of the pandemic, there was hoarding because there were shortages so people were hoarding paper towels and toilet paper, and things like that. I took a photo on the Friday before New York city really locked down in 2020. That Friday in mid-March, I think it was a Friday, the 13th in fact. It was at Trader Joe's. I was trying to stock up for what I thought was going to be a really long lockdown of two weeks.

I went to the frozen vegetable aisle and it was entirely empty except one very full bin of Brussels sprout. I thought, "Wow, people really don't like Brussels sprouts." Every other frozen vegetable bin at Trader Joe's that day was completely empty, and for a good reason at that time. People thought they were going to be locked in, they didn't know for how long, so they were stocking up on things they could freeze and use over time. Are we seeing anything like that today?

Greg: There's anecdotal discussion that perhaps hoarding might be one of the reasons for the baby formula shortage. It certainly seemed to be a factor behind the toilet paper shortage two years ago. Much as we'd like to call on people to think broad-mindedly and above every collectively rather than just their own needs, that's not really how our market economy works. You'll often hear people invoke the airlines, the routine you hear when you get on an airplane, which is if there's a loss of cabin pressure, put on your own mask first and then put it on and then look to others.

That's how people think about these shortage periods is, "I'm going to make sure that my children are taken care of first, then I'll worry about society more broadly." That's the way we've been. I think though that doesn't mean there's nothing we can do. I think there are two things importantly in our market-based economy with a safety net, that policymakers have to do. The first thing they have to do is reassure people that supply will be there. The best way to get people not to panic is to reassure them that the supply is on its way.

For example, that's one of the reasons we have a strategic reserve of oil to make sure that people know even if there is a temporary shortage or a disruption to the supply of oil, because of, for example, a war, that it will not mean that you are going to not be able to fill up your gas tank tomorrow. That does tend to do the job that's expected to do. That's job number one.

Job number two is to allow the market economy to work. We have a system where when there is too little supply or too much demand prices go up. The rise of price is an important signal that tells people to conserve on their consumption, drive less in the case of gasoline, hoard less in the case of groceries, perhaps, and it tells producers to produce more of the thing that we need.

I am fairly certain that the industry is doing its best to figure out how to make more baby formula, how to make more eggs. The semiconductor companies are working flat out to produce more semiconductors because there's a shortage which has driven up those prices. In the face of all the disruptions that we've had over the last year, whether it was pandemic, whether it's China COVID, whether it's Ukraine, it's hard to stay ahead of these and try and get on top of the shortages, but I'm fairly confident that with time the market economy will do what it's supposed to do, and it will resolve these shortages.

Brian Lehrer: Politics on who to blame. Here's another clip of the president yesterday blaming Republican policies while saying he's the one doing something about inflation.

President Biden: Americans have a choice right now between two paths, reflecting two very different sets of values. My plan the tax inflation and gross the economy by lowering costs for working families, giving workers well-deserved raises, reducing the deficit by historic levels, and making big corporations and the very wealthiest Americans pay their fair share.

The other path is the ultra MAGA plant, put forward by congressional Republicans to raise taxes on working families, lower the income of American workers, threaten sacred programs Americans count on like Social Security, Medicare, and Medicaid, and give break after break to big corporations and billionaires, just like they did the last time they were in power when their top priority was the reckless $2 trillion tax cut, majority of that going to the very wealthiest Americans, which ballooned the deficit, and not a penny was paid for.

Brian Lehrer: There is President Biden yesterday. Greg, you're an economics commentator, not a political commentator so I'm not going to ask you to choose up sides here in any way, but how would you compare the Democratic and Republican approaches to inflation in this midterm election year?

Greg Ip: I'm not sure there is a Republican approach. In some sense, they're taking advantage of the fact that inflation is very high, and people are naturally going to blame the person in power for it. There has been some discussion that Biden's stimulus plan that was passed within a few months of him taking office added to the very strong demand that we have in the economy, and that's part of the reason we have inflation today. There's probably some truth to that, but we had a lot of stimulus under President Trump as well so I don't think that you can say there's only one party to blame if, in fact, we've had too much fiscal stimulus.

The truth of the matter is the severe shortages and supply disruptions that we've been enduring for about two years, they're not the fault of anybody in power. They are traceable to these global events, like the pandemic, like the invasion of Ukraine that cannot be traced to any particular individual or policy choice. I will say, though, that there was something that President Biden said at the beginning of his remarks, that was very important. He said, "The main way I'm going to fight inflation is by asking the Federal Reserve to do its job." That is absolutely key.

We have an independent central bank whose job number one is dealing with inflation, and the best thing the president and Congress can do is let them do their job and encourage them to do their job. There are several nominees to the Board of Governors of the Fed that are awaiting confirmation in the Senate. Getting those people in place will help the Fed get to full strength and do its job.

President Trump regularly attacked the Fed, President Biden has not done that. That I think gives it a little bit more leeway to do the necessary job. It's not going to be pleasant, unfortunately. The way the Fed gets inflation down is to cool off the economy, and the way it does that is by raising interest rates. I think it's a pretty sure thing that interest rates are headed higher. It will continue to be a rocky period in the financial markets, but the best thing that our political classes can do is to let the Fed do its job and indeed encourage the Fed to do its job.

Brian Lehrer: Let me get two quick political reactions in here that I think are different from each other, and then we're going to be out of time. Alec in the Bronx, you're on WNYC. Hi, Alec.

Alec: Hi. Can you hear me?

Brian Lehrer: I can hear you just fine.

Alec: I was thinking about Biden. I think the message needs to be stronger and firmer. I think the key points are energy, you got oil, and you got renewables. How you handle those two things,\ is going to direct I believe the economy, probably throughout the whole world in some way, and of course, it's going to affect the market as well. I think those two factors, and I think he needs to express the direction, what's happening on those two fronts, because they're interrelated, one is going to affect the other. We get more renewables, they'll be less demand on oil, and prices will drop of oil.

I think that's a very key issue, but the way he drives his points to the American people, maybe in detail, and even maybe to the big corporation, as well, he needs to be I think very firm in how he presents it as Trump was very firm in whatever he did. [chuckles]

Brian Lehrer: Yes, Alec, thank you very much. I appreciate that. Greg, very briefly on that. One of the things that the Republicans are pushing is for Biden to allow more production of oil, and he's doing some things that are making progressives who are very much for renewables very unhappy. Strategic oil reserves, allowing drilling, again, on federal lands. These things are so fraught, but one is short-term: the more production, the other is longer-term: switching away from renewables. I don't know if they're apples to apples.

Greg Ip: You're right. Switching to renewables will eventually insulate us from shortages of things like natural gas and oil, but that is an extremely long process taking decades, and it simply is not going to help us with the current price pressures we're dealing with right now. It is true that if we could somehow boost production in the United States, or offshore or among our allies, that would help with the price of oil, but let's remember, this is a global market. When we produce more oil in the United States, that oil doesn't necessarily go to American consumers and lower their prices, it goes into the international market.

The effect for Americans individually is completely diluted by the fact that they have to compete with everybody else around the world for that oil. In any case, even if the president would, for example, make more land available for leasing and drilling, it would be at least another year or two before that oil is flowing to the market, and it's not obvious that the industry would consider that a profitable thing. There are a lot of ideas out there on how to reduce our exposure to these high energy prices in the long run, but I think the harsh truth is that none of them are going to deliver relief in the next few months, which is of course when people really wanted.

Brian Lehrer: Except maybe at least a little bit the one that Jesse in Westchester is calling about. Jesse, you are on WNYC. Hi, there.

Jesse: Hi. Thank you for taking my call. Thank you, Mr. Ip. I loved reading you when I was reading The Wall Street Journal for 44 years the last thing I could read before I got to the Op-Ed page. Thank you for all your insights there. I wanted to ask you a question, your thoughts on these Republican-led states that are relaxing taxes or taking away taxes, state taxes that is on gasoline and food to allay some of the price pressure that the market is facing right now. Is it politically motivated and more importantly, is it the fly in the face of what the Feds are trying to do and will have deleterious effects long-term on inflation? Thank you.

Brian Lehrer: Jesse, thank you. It's not just Republican states, Governor Hochul got the legislature to pass a bill that's going to roll back the gasoline tax in New York State by 16 cents a gallon, at least for the summer, beginning in June, feeling the political weight as she runs for re-election of people's inflation concerns. Greg, what will you say to Jesse, and then we're out of time?

Greg Ip: When you lower the price of something, people can see more of it. If you basically reduce the taxes on gasoline, you will encourage people to consume more gasoline, and that adds to the demand pressure, and so in some sense, it extends the problem. Look, I understand why these governors are doing it and it's not just red state, it's also blue state governors. People want relief right away.

I'm not running for office, I don't hold office, I comment on the economy. I can tell you why from a global sense that these tax cuts may actually drag out the problem, but as a political sense, I also understand why they're doing it. At the end of the day, I think the tax cuts are probably too short-lived and too small to really make a big difference in the aggregate sense.

Brian Lehrer: Greg Ip is chief economics commentator for The Wall Street Journal. Thank you so much. I could tell our listeners really enjoyed this. Thank you.

Greg Ip: Thank you for having me, Brian.

 

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