Prices jump dramatically because container ships are stuck in ports and because offloaded goods are waiting for trucks, resulting in significant price shortages and delays causing a longer-than-expected bout of inflation. The rising costs are undermining workers’ wages, creating a drag on growth and leading to Republican criticism of Biden just as his trillions of dollars in tax, economic, climate and infrastructure agendas pass through the crucible of congressional negotiations, according to the Associated Press (AP).
The White House responded to the backlog by finalizing an agreement for the Port of Los Angeles to become a 24-hour, seven-day-a-week operation. The hope is that night operations will help break the deadlock and reduce delays in shipping toasters, sneakers, bikes, cars and more.
“With the holidays approaching, you may be wondering if the gifts you plan to buy will arrive on time,” Biden said at the White House. “Today we have some good news: We will help expedite the delivery of goods across America.”
But the expansion of port operations was also an unspoken acknowledgment that inflation was staying at higher levels long after the economy began to open up from the coronavirus pandemic. Companies were concerned about the ongoing months-long delay of shipping containers in June, however, and the department only set up its Supply Chain Task Force that month and appointed an envoy to the port on August 27 to meet the challenge.
The ports are also just one piece of the puzzle, Biden said. The country needs more truck drivers and private retailers to bolster and improve its infrastructure, as well as a supply chain that can easily be disrupted by epidemics and severe weather. The president is trying to use the impasse as a selling point for his policy plans, which are under congressional scrutiny.
“We need to take a longer view and invest in building greater resilience to withstand the kinds of shocks we’ve seen over and over again, year after year, the threat of pandemics, extreme weather, climate change, cyberattacks, and weather disruptions,” he said.
The feeling of uncertainty began to grip the attention of many Americans.
“The economy is in a very fragile and unprecedented position,” Betsy Stephenson, an economist at the University of Michigan, noted on Twitter. Prices are rising more than 5%, trade in goods and services has slowed, and more Americans are giving up their jobs, while the delta shape has made the coronavirus pandemic a risk.
“Nobody really knows what’s going to happen,” wrote Stevenson, a former member of the White House Council of Economic Advisers under President Barack Obama.
The ports in Los Angeles and Long Beach, California, account for 40% of all shipping containers entering the United States. As of Tuesday, there were 64 ships moored at the two ports and 80 waiting to dock and unload, according to the Southern California Maritime Exchange.
Commitments from the Port of Los Angeles operator, stevedoring workers, and many of the nation’s largest retail and freight forwarding companies are expected to help ease the backlog.
Walmart, FedEx, UPS, Target, Samsung and The Home Depot have all committed to discharging during peak hours, making it easier for the Port of Los Angeles to operate non-stop. Long Beach Port has been operating 24 hours a day for approximately seven days for the past three weeks.
Biden also held a virtual roundtable with the heads of Walmart, FedEx Logistics, UPS, Target, Samsung Electronics North America, Teamsters Union and the American Chamber of Commerce, among other groups, prior to his speech.
Republican lawmakers say Biden’s $1.9 trillion coronavirus relief package has sent prices up. A recent analysis by investment bank Goldman Sachs estimates that “goods constrained by supply” account for 80% of inflation overruns this year, yet political criticism remains scathing as housing and oil prices add to inflationary pressures.
Senate Republican Leader Mitch McConnell has made Kentucky inflation one of his central charges against Biden, signaling that price control may be necessary for Democrats trying to hold onto seats in Congress in next year’s election.
“Democrat inflation is so bad that even though the average American worker has had a pay increase of several percentage points over the past year, their actual purchasing power has gone down,” McConnell said in a speech in the Senate last week. Even dollar stores have to raise their prices. Just ask any American family about their last few trips to the supermarket, gas station, or toy store. God forbid if they have had to participate in the housing market or the auto market at any point recently.”
The Biden administration has argued that rising inflation is temporary. However, supply chain problems persisted months after the economy began to open up and recover as vaccines reduced many of the pandemic’s risks.
The Bureau of Labor Statistics reported Wednesday that consumer prices rose 5.4% from a year ago. This is well above the Fed’s 2% target. Rising costs of energy, food and shelter were the main factors behind the price increases in September.
RAE