Analysis & Comment

Opinion | I Warned the Democrats About Inflation

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By Steven Rattner

Mr. Rattner served as counselor to the Treasury secretary in the Obama administration.

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.

But last Thursday, Joe Manchin, a key centrist Democratic senator, suggested that he may want to delay consideration of the legislation until early next year because of his concerns over its impact on inflation. For the Biden administration, which has long insisted that prices would rise far more slowly, inflation is now its biggest challenge.

How could an administration loaded with savvy political and economic hands have gotten this critical issue so wrong?

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