August 16, 2022

Veterans of Carter-Era Inflation Warn That Biden Has Few Tools to Tame Prices

The Biden administration has been looking for ways to lower oil prices globally. Treasury Secretary Janet L. Yellen has been pressing her European counterparts to impose a price cap on Russian oil exports, and the Group of 7 industrialized nations agreed last week to explore the idea.

Some of the proposals for easing the pain of inflation on Americans, such as the gas tax holiday or student loan debt forgiveness, have been dismissed by economists who say they might make inflation worse. Others have been criticized, like Mr. Biden’s upcoming trip to Saudi Arabia, which some have called pandering to a state that the president once likened to a “pariah” over its role in the assassination of Jamal Khashoggi, a Washington Post columnist and a prominent dissident. Mr. Biden said last week that he would not ask the Saudis to increase oil production.

C. Fred Bergsten, the assistant secretary for international affairs at the Treasury Department from 1977 to 1981, said the United States should avoid the kind of domestic oil price controls that were in place during the 1970s and that the Carter administration eventually abandoned in 1979. Describing them as an “abysmal failure,” Mr. Bergsten said they distorted energy markets.

“One lesson from the Carter administration is don’t do that,” Mr. Bergsten, 81, said. “Energy price controls discourage production and held down the supply side over time.”

Mr. Bergsten suggested that rolling back some of the Trump-era tariffs on $360 billion worth of Chinese goods that economists say have driven up costs for American consumers could offer some marginal relief from inflation. He also thinks Democrats should consider tax increases that would be targeted mostly at the wealthy to reduce the pent-up demand in the economy that continues to push prices higher. Proposals such as the gas tax holiday would most likely just fuel more inflation, he predicted, by giving drivers more money to spend, and would make the Biden administration look desperate by resorting to gimmicks.

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