EDITORIAL: Progress on inflation but economic issues remain

President Joe Biden wasted little time this week touting the latest inflation report, a positive development after many months of disappointing economic news. But perspective remains key.

The Department of Labor reported Tuesday that prices remained stable in November, rising just 0.1 percent. That reduced the year-over-year inflation rate to 7.1 percent, the lowest since last December. Price hikes for both food and gasoline — household staples — have cooled.

The new numbers indicate that the Federal Reserve has had some success in attacking the highest inflation the nation has experienced in 40 years. In July, the annual rate hit 9 percent. It has moved downward for four straight months as the Fed hiked interest rates — as it is expected to do again Wednesday.

But the administration should avoid taking a victory lap for problems triggered by its own policies — especially because conditions have in no way returned to what most consumers would consider normal.

For instance, when the president was inaugurated, the national average for a gallon of gasoline was $2.39. While Nevada drivers and others are no longer paying north of $5 a gallon, the U.S. average is still $3.25, a 36 percent increase from when Mr. Biden took office.

In addition, the relief consumers experienced last month on the inflation front was all but eaten up by rising expenses associated with an increase in the cost of money. Home loans, car loans and credit card purchases are all more expensive thanks to the bump in interest rates. “Higher prices are merely being shifted from goods and services that are immediately consumed into longer-term costs,” notes Eric Boehm of Reason magazine.

Higher interest rates also put more pressure on the nation’s financially troubled entitlement programs and make it more burdensome for the government to carry $31.4 trillion in debt. Yet, the Biden administration has shown no inclination to address such issues, and, as Mr. Boehm points out, “lawmakers are using this year’s lame-duck congressional session to spend and borrow even more.”

Meanwhile, some economists continue to warn about the danger of a recession. The labor market remains dysfunctional despite higher wages, as the Labor Department reports that nearly 20 percent of Americans ages 25 to 34 are not employed at a time when “help wanted” signs are ubiquitous. Overall, the labor participation rate is at 62.1 percent, below pre-COVID levels.

If Mr. Biden wants to brag about 7 percent inflation and moribund workforce, fine. But a more productive approach would be to emphasize policies that encourage work and entrepreneurialism while jump-starting economic growth rather than sating the federal bureaucracy. If the president resists such a path, the Republican House must show him the way.