On The Money: Inflation spike puts Biden on defensive | Senate Democrats hit spending speed bumps | Larry Summers huddles with WH team

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THE BIG DEAL—Spiking inflation weighs on Biden economic agenda: A surprising June spike in inflation has created another obstacle for President Biden ahead of a critical push for his economic agenda.

Biden and congressional Democrats are taking steps toward passing both a bipartisan infrastructure deal and a much larger party-line bill before the end of August, all while needing to raise the federal debt limit.

But new data shows there was an unexpected surge in consumer prices, putting the White House on the defensive after weeks of rallying support for Biden’s spending plans.

• The Labor Department reported Tuesday that the consumer price index (CPI), a key gauge of inflation, rose 0.9 percent in June and 5.4 percent in the 12 months leading into last month — each the highest rate since 2008. 
• While consumer prices were widely expected to keep rising, inflation spiked far faster than the consensus 0.5 percent increase projected by economists.

What it all means: Despite June’s sharp price increases, most economists still believe inflation will fall off later in the year as a wide range of short-term factors dissipate. Most of the June increase in the CPI came from goods in short supply or high demand — such as used cars, hotel rooms and flights — that were cast aside during pandemic lockdowns.

“The headline number and certainly the core number was shocking. But when you started to look at it, what you saw was just an exaggerated version of what’s been going on the last several months,” said Daniel Alpert, managing partner of investment firm Westwood Capital.

Even so, it could be months until prices begin to cool off and supply chains are back to normal, posing serious obstacles to Biden’s spending plans and leaving him vulnerable to GOP attacks.

I explain why here.

Read more on the infrastructure push: 

• Larry Summers, who served as a top economic adviser to former President Obama, met with top White House economic officials Brian Deese and Cecilia Rouse on Tuesday to discuss President Biden’s agenda.
• The U.S. Conference of Mayors is throwing its support behind the bipartisan infrastructure deal, joining business and labor groups in urging lawmakers to pass the $1.2 trillion proposal.

LEADING THE DAY

Senate Democrats hit speedbumps with big spending plans: Senate Majority Leader Charles Schumer (D-N.Y.) is urging Democrats to stick together as his ambitious plan to move a scaled-down bipartisan infrastructure bill and a much larger budget reconciliation spending package on parallel tracks hits speedbumps.

• Senate Democrats need to clinch a deal on the size and scope of a much larger infrastructure package they plan to pass under the budget reconciliation process, which prevents the GOP from blocking the measure with the filibuster but means Democrats must be completely unified.
• One Democratic aide said “the million-dollar question” is whether the entire Democratic caucus will unify behind the budget resolution, which is seen as a prerequisite to moving the scaled-down infrastructure proposal — which is also important to some members who want to show Washington can still secure a bipartisan victory

Schumer at a closed-door lunch meeting Tuesday urged his colleagues not to let their personal agendas derail President Biden’s goal of enacting a $4.1 trillion infrastructure agenda.

“Chuck is delivering the message he has to deliver, which is ‘Don’t let the perfect be the enemy of the good, this is our one shot to do big stuff,’” a Democratic senator said of Schumer’s message. He told colleagues: “Everybody has come at me privately saying ‘I won’t vote for it unless I get this,’” according to the lawmaker. The Hill’s Alexander Bolton takes us inside the meeting.

The obstacles: 

• Centrist Sen. Joe Manchin (D-W.Va.) complicated negotiations Tuesday by telling reporters that he wants all of the bipartisan plan as well as all of the reconciliation package paid for with other spending cuts or tax hikes.
• Other Democrats have balked at the idea of offsetting the full cost of Biden’s infrastructure agenda.
• But centrist Democrats from more conservative states are growing nervous about the soaring deficit and rising inflation, which Republicans are blaming on federal spending.

Trump warns GOP to not erode his tax cuts: Meanwhile, Former President Trump on Tuesday also warned Senate Republicans against reversing the tax cuts enacted during his presidency as Democrats seek to raise taxes on the wealthy and corporations to finance their spending priorities.

“Republicans in the U.S. Senate must not in any way, shape, or form increase taxes that were won in the TRUMP TAX CUT, the largest in the history of our Country,” Trump said in a statement. “It’s what made our economy grow and great.”

• Republicans are unlikely to back tax hikes to pay for Democratic spending priorities anyway, but the ex-president does continue to exert power over the House and Senate GOP.
• GOP lawmakers argue that the tax cuts drove the strong pre-pandemic economy, but Democrats argue that they did not have much of an impact on the economy and largely benefited businesses and high-income households.

“The tax cuts were a great achievement of the Trump Administration and the Republican Party. More importantly, they were a great victory for our Nation,” Trump said. The Hill’s Naomi Jagoda has more here.

ON TAP TOMORROW:

• Labor Secretary Marty Walsh testifies before a Senate Appropriations subcommittee on the Department of Labor’s fiscal 2022 budget request at 10 a.m.
• Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee at 12 p.m.
• A House Small Business subcommittee holds a hearing on innovation through the Small Business Administration at 1 p.m. 
• A House Ways and Means subcommittee holds a hearing on expanding access to housing at 2 p.m.
• A Senate Finance subcommittee holds a hearing on investing in U.S. competitiveness at 2 p.m.
• The Joint Economic Committee holds a hearing on concentrated corporate power at 2:30 p.m.

Thursday, July 15: “Revitalizing America’s Cities” — As cities look to rebuild in a more inclusive and resilient manner, what role can microbusinesses play? On Thursday, July 15 at 1 PM, Miami-Dade County Mayor Daniella Levine Cava, Montgomery Mayor Steven Reed, Baltimore Mayor Brandon Scott, Dayton Mayor Nan Whaley, and more will join for a virtual conversation on how microbusinesses could re-energize our cities. RSVP here.

GOOD TO KNOW

• Democrats are looking to counter GOP attacks on rising gas prices by talking up job gains and wage growth heading into a crucial midterm election year where both the House and Senate are up for grabs.
• President Biden has tapped a former Pentagon official from the Obama administration, Alan Estevez, to be Commerce Department undersecretary overseeing export control.
• David Weil, President Biden’s pick to run the Labor Department’s Wage and Hour Division, is facing fierce opposition from several business groups.
• President Biden has tapped a former Pentagon official from the Obama administration, Alan Estevez, to be Commerce Department undersecretary overseeing export control.

ODDS AND ENDS

• France’s competition authority fined Google more than $550 million Tuesday for not negotiating with French publishers in good faith.
• Consumer Reports is launching a nationwide campaign aimed at improving transparency of the cost and quality of broadband service.