The GOP Inflation Blame Game
By the HCDP Communications Team
- Consumers are hit by inflation and Republicans greet it with joy, blaming Democrats
- The COVID recovery and supply chain disruptions are causing inflation
- The remedy is effective Federal Reserve policies and the Biden Build Back Better agenda
Inflation is making headlines, and Republicans appear to be reveling in it.
Consumers are experiencing price increases not seen for decades. Rising gas prices are easy to see and compare, especially now. As vaccinations and testing increase, families are more inclined to resume holiday travel, and many feel more comfortable in their cars than on crowded airplanes.
But it’s not just gas prices. Price increases are occurring across-the-board, from Thanksgiving turkeys to holiday gifts with little relief in sight.
CNN reports that as far back as last July, Republicans began blaming inflation on their old tax and spend mantra against Democratic economic policies. Business Insider reveals how Republicans think inflation can be a winning issue in the mid-term elections, with Sen. Rick Scott (FL) calling inflation “a gold mine for us.”
So much for any feeling for cash-strapped consumers when, apparently, it’s better to hope that inflation continues into the next election.
The tax and spend mantra is nothing more than political posturing. For spending to have caused the current round of inflation, the spending must already have occurred. The spending that Republicans are saying is causing inflation is the stimulus bill that passed last spring in response to the COVID pandemic. The stimulus succeeded in moving the recovery forward. Jobs grew and most economists agree that the stimulus package had only a minor impact on inflation.
Republicans, and some Democrats, like Sen. Joe Manchin (WVA), are using inflation to argue against Biden’s Build Back Better program. Whether one supports ideas like universal pre-K, free community college or paid leave, none of that spending has happened, so it can’t have caused any inflation. As a matter of fact, an open letter from Nobel laureates explains how Biden’s agenda addresses Republicans’ inflationary concerns:
“Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures,” they wrote.
The Real Cause
The causes of today’s inflation are related to the COVID pandemic downturn and the recent recovery. Economies across the world shrunk as the pandemic ravaged countries with death and overflowing hospitals. Companies closed, unemployment rose, and citizens became isolated in a world of virtual meetings. There was no one to buy products and services.
Mask wearing grew in many areas, vaccinations expanded, and people learned how to cope with COVID. Consumers did not spend during the previous year or so. This year, they started spending the savings and stimulus checks from the previous year. Demand recovered, but supply did not keep up. Getting production up to speed requires planning, resources, and implementation. Those take time.
Supply chains have become part of the inflation discussion, and they are a good example of what happens over time. In the 1980s, a revolution in ocean-going containerization and an increase in the size of ships provided the opportunity to expand trade. That, in turn, aided the shift in production to Southeast Asia and Asia. Add to that the growth in computerization, and world trade was transformed. Domestically, automation was introduced into an increasingly centralized warehousing and distribution system.
The pandemic upended the supply chain. Consider computer chips. Taiwan is the largest chip producer in the world, and when there is a disruption with the supply from Taiwan, production elsewhere in the world suffers. Everything from smart appliances, video games and new cars stopped coming off the production line. As consumers waited for new cars, demand and prices for used cars increased, thus, contributing to inflation.
Controlling inflation and maintaining employment are the job of the Federal Reserve. By controlling interest rates, the Fed can expand the money supply to stimulate growth or restrict the money supply to discourage growth. For instance, if the economy is growing too fast and prices are increasing, the Fed can raise interest rates to slow things down. Slowing things down, though, runs the risk of cutting back too fast leading to a recession. Slower growth translates into fewer sales and that turns into unemployment. That’s the environment the Fed now faces as it tries to keep inflation under control with unemployment claims at their lowest level since 1969.
Earlier this month, Jerome Powell was reappointed Chair of the Fed. As Reuters reported:
“The Fed is confronting an historic surge of inflation as global supply chains remain disrupted by the coronavirus pandemic. The Fed earlier in November released its asset purchase schedule as it begins to slow purchases,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. “The markets are going to take this as a sign of relief.”
Blaming Democrats for inflation might turn out to be a successful campaign slogan for Republicans in the mid-term elections, but blame is not a remedy.
Instead of blame, successful inflation and employment balancing by the Fed and investment in education, healthcare, and the environment are what’s needed. Concrete investment and planning policies like Build Back Better are not simply campaign soundbites to get votes in the next election. After decades of Republicans refusing to fund roads and schools to give tax breaks to the wealthy while workers’ wages stagnated despite booming productivity, it’s time to change the game.
Time to #RISEUP!
If you believe Congress should pass President Biden’s Build Back Better Agenda, please contact Sens. Lindsey Graham and Tim Scott as well as Rep. Tom Rice and tell them to stand up for the people, not the wealthy and corporations.
Further, if you would like to support HCDP’s efforts in Horry County to elect Democrats and support the Democratic agenda, please contribute. It’s time to #RISEUP! and defeat the Republicans’ efforts that will only destroy our nation. Please join us in that effort.