Joe Biden and his fellow Democrats have been eager to celebrate America’s economic rebound as pandemic-related restrictions are relaxed and more businesses reopen. But there has been a sore spot in recent economic reports that Democrats have been less enthusiastic about: inflation.
As Americans begin to resume their pre-pandemic routines, they realize they are paying more for certain common goods, such as gasoline and used cars. In June, consumer prices increased 0.9% from the previous month, limiting the highest inflation increase in 12 months since August 2008.
Republicans have pointed to rising inflation as a clear sign that Biden’s large spending packages are hurting American families, while Democrats have insisted that the price increases are simply a temporary result of the reopening of the economy.
Now, as Americans wait to see how prices will change in the coming months, politicians are preparing for a battle over inflation that could bleed out in next year’s midterm elections with Republicans eager to use it as a weapon to attack. to Biden and possibly regain control. congressional.
The president and his advisers have primarily tried to minimize the rise in inflation, noting that most of the price increases are occurring in a small handful of sectors.
“Our experts believe and the data shows that most of the price increases that we have seen were expected and expected to be temporary,” Biden said Monday. “The reality is that you cannot turn the global economic light back on and not wait for this to happen.”
Biden’s Secretary of the Treasury, Janet Yellen, has echoed that view, predicting that inflation will return to normal levels “in the medium term.”
“We will have several more months of rapid inflation, so I’m not saying this is a one-month phenomenon,” Yellen told CNBC last week. “Of course, we have to watch him carefully.”
But Republicans have blamed rising inflation, at least in part, on the $ 2 trillion coronavirus aid package Biden enacted in March. They say the bill, called the American Rescue Plan, has effectively created a tax increase on American workers by causing price increases.
“Inflation is rampant due in part to the runaway spending of President Biden and President Pelosi,” House Minority Leader Kevin McCarthy said on Twitter last week. “Not make mistakes[,] with inflation rising at the fastest rate in 13 years, his hard-earned money is worth less in Joe Biden’s America. “
Michael Steel, a former senior adviser to Jeb Bush and former House Speaker John Boehner, said the inflation-related arguments could resonate with midterm voters if consumers still feel a label shock next year. .
“I think the Biden administration is deliberately downplaying or underestimating the risks of sustained inflation because of their desire to massively increase government spending,” Steel said.
“I think people have an intrinsic understanding of the fact that spending money you don’t have makes inflation worse. And while four decades have passed since inflation was a politically powerful problem, it can become so very quickly again. “
So far, Democrats have responded to the attacks on inflation in two different ways. One argument they make is that average families are better off thanks to the American Rescue Plan, because of the amount of money they received from the aid package.
“Thanks to House Democrats who passed the American Rescue Plan, we are crushing Covid-19, boosting the economy and providing revolutionary relief to working families with the Child Tax Credit,” said Chris Taylor, spokesman of the Campaign Committee of the Democratic Congress. .
“Each and every Republican in Congress voted against this relief. Now, they are desperately searching for something to say after abandoning the American people. “
Some liberal economists have also suggested that most Americans are not too affected by rising inflation because it is limited to certain items, particularly in industries affected by the pandemic, such as air travel and hotels.
“Where inflation is happening right now, people can largely avoid it,” said Christian Weller, senior fellow at the liberal Center for American Progress. “Most people don’t have to buy a used car and most people don’t have to fly.”
But Weller acknowledged that many Americans are eager to travel after enduring a year of pandemic-related restrictions.
“I understand that people are impatient,” Weller said. “They want prices to come down sooner, but it will take a little time.”
If current price increases persist, it could put Democrats at a political disadvantage as they try to pass Biden’s infrastructure proposals, requiring trillions more in government spending.
Republicans have pointed to rising inflation to justify their opposition to the $ 3.5 trillion bill that Democrats are drafting to expand Medicare, invest in the care economy, and fund climate-related initiatives, among other things. .
“It would be difficult to imagine a proposal less suited to the conditions our country faces,” Senate Minority Leader Mitch McConnell said last week. “Americans cannot afford another socialist borrowing, taxes and spending spree that will kill jobs and increase costs for working families.”
Jason Furman, who previously served as chairman of the Council of Economic Advisers during Barack Obama’s presidency, said such arguments do not hold up because of how the infrastructure proposals are structured.
While the US Rescue Plan resulted in an immediate injection of cash into the US economy through aid payments, the money from the infrastructure bills would be spread over the course of several years. Thus, infrastructure proposals, if enacted, are much less likely to have a significant impact on inflation.
“I think the inflation debate on the current legislation is a red herring, but I don’t think it’s totally false on the last one,” Furman said.
The former CEA president was somewhat skeptical of Democrats’ attempts to minimize rising inflation as a short-term result of supply chain bottlenecks in certain sectors affected by the pandemic.
“I think people also spend more and spend more because they have more,” Furman said, referring to the American Rescue Plan relief payments.
He added: “I think a lot of what we are seeing is transitory, but I think there is a core that is potentially more permanent. And then the question is, are wages adjusted to make up for it? “
The answer to that question could determine who controls Congress after next year’s midterm elections.
George is Digismak’s reported cum editor with 13 years of experience in Journalism