Alarm bells ringing in the White House over economy as Biden faces new headwinds

Alarming economic numbers and scenes of long lines at gas pumps in the Southeast are causing new political hurdles for President Joe Biden just as he begins negotiations with Republicans over major new spending proposals.

The White House this week has scrambled to contain the fallout of a pipeline shutdown at the same time new figures showed a spike in inflation and last week’s monthly job report reflected turmoil in the labor market.

The disparate factors are not all directly related, and the pipeline shutdown was prompted by Russia-based ransomware hackers who penetrated a weak private sector network. While that did not affect supply, it prompted a rush of panic-buying from the public, leading to gas shortages in multiple states. Administration officials say the other matters are the expected blips of an economy emerging from a catastrophic pandemic-related crisis, with demand surging as Americans return to a new normal.

But combined, the elements have caused new pressures for a President eager to enact sweeping new legislation while also cultivating Republican support for at least part of his plans. At the same time, new violence erupting between Israelis and Palestinians has drawn Biden’s attention to a fresh foreign crisis.

The Colonial Pipeline was back running on Thursday after a two-day stretch of long lines at gas stations and pumps running dry. Biden sought to aggressively head-off the gas crunch through waivers and other means, but the problems are likely to persist as the network gets back online.

“People will start to see normalcy in the next couple of days, hopefully by the end of the weekend,” Energy Secretary Jennifer Granholm said Thursday on CNN’s “New Day.” “This will be resolved within days.”

Administration officials and Cabinet secretaries have come to cameras to update reporters in the White House briefing room each of the past three days, a sign of the intense focus inside the West Wing on the matter. Biden himself is dedicating a morning event Thursday to the Colonial Pipeline incident.

The flurry of activity reflected heightened awareness of the politically fraught nature of gasoline prices, which can affect Americans in every part of the country and cause a drag on elected officials’ popularity. The timing also coincided with the start of summer road trip season just as Americans return to the road for post-lockdown trips.

Biden was first updated on the situation while at the Camp David presidential retreat in Maryland over the weekend and has been monitoring it intensely all week, according to officials.

He has taken credit for easing regulations on transporting fuel on highways, and other agencies have also loosened rules that would allow gas to flow more easily amid the crunch.

Still, long lines of cars at pumps and hand-written “no fuel” signs made for potent imagery that Republicans are pointing to as a sign that Biden’s economic policies aren’t working.

On Thursday, Biden is likely to describe the steps the administration has taken to alleviate the fuel issue and mention the executive order he signed Wednesday seeking to harden government systems against cyberattacks. The new rules wouldn’t have applied to Colonial, but administration officials tell CNN they hope the order — which requires new safety measures on software and requirements on reporting hacks — will trickle down to the private sector.

Biden is also likely to use the time to make a pitch for his infrastructure plan, saying the nation’s critical systems need to be better protected against hackers. The President has spent this week pressing congressional leaders on his plans, which combine to more than $4 trillion in new spending. He’ll meet Thursday with West Virginia Sen. Shelley Moore Capito and other Republicans to continue the effort.

But the economic headwinds could make his pitch harder. Already, Republicans are citing inflation numbers as a sign that the President’s economic policies are failing, including the two Republicans who Biden met in the Oval Office on Wednesday.

“Those numbers we heard today on inflation? That should terrify every American,” said House Minority Leader Kevin McCarthy, a California Republican, standing outside the White House after an Oval Office meeting.

He and Senate Minority Leader Mitch McConnell, a Kentucky Republican, said they raised concerns about inflation with Biden during their meeting, even though they described the session overall as productive.

The White House continued to publicly downplay inflation concerns on Wednesday, saying the new data reflects pent-up consumer demand that some suppliers cannot immediately meet. Press secretary Jen Psaki said administration economists, including those at the Federal Reserve, have anticipated short-term bursts of inflation that will recede as the economy returns to normal.

“That’s something that we have prepared for and that most economists say will be temporary,” she said.

But leading Democratic economist Larry Summers used the troubling numbers to urge the White House to shift course away from distributing Covid relief funds, which he blames for increased spending and inflation.

“Policymakers at the Fed and in the (White House) need to recognize that the risk of a Vietnam inflation scenario is now greater than the deflation risks on which they were originally focused,” Summers told CNN’s John Harwood.

Prominent economists, including Federal Reserve Chairman Jay Powell, disagree with Summers and administration economists remain confident in their “go big” approach, cautioning against overreacting to a single month’s disappointing numbers. While they monitor conditions for signs of lasting problems, they continue to find encouragement in employment and output growth. They acknowledge, however, that coming back from a once-in-a-century pandemic creates a heightened level of unpredictability.

“We need to be cautious and humble,” one administration official said. “We haven’t been through this before. The path to getting between here and normalized is going to be a bumpy and uncertain one.”