Like a broken clock, Republicans were right on inflation this time

WASHINGTON — With prices rising at the fastest rate since 1982, Republicans are hitting President Joe Biden and Democrats on inflation ahead of this year’s midterm elections.

Inflation is a powerful political issue because it affects virtually everyone — and Republicans say they saw it coming from a mile away.

“This time last year, we tried to tell the Biden administration not to pour trillions of dollars into this economy,” Sen. Cindy Hyde-Smith (R-Miss.) said earlier this month. -this.

Republicans warned last year that the US bailout, the $1.9 trillion stimulus package signed by Biden in March 2021, would increase inflation.

In the broadest sense, they were right. The inflation is there. And cash payments and extra unemployment benefits provided by the US bailout likely helped, though there is much disagreement among economists about how much blame the bill deserves.

Republicans, however, did not predict chip shortages, logistical bottlenecks or the shift in consumer spending from services to physical goods, the main causes of price increases since last year.

So how did the Republicans know inflation was coming, and why didn’t the Democrats listen? Probably because crying about inflation is something Republicans always do, no matter what, and many past warnings have gone nowhere.

Sen. John Thune (RS.D.), joined by Sen. Mike Crapo (R-Idaho), speaks during a press conference on inflation at the Russell Senator Office Building on February 16.

Kevin Dietsch via Getty Images

In 2009, as the economy emerged from the Great Recession, many Republicans said an $800 billion stimulus bill would cause prices to soar.

Sen. John McCain (R-Arizona) told the Senate in January that if Congress doesn’t find a way to deal with the growing federal debt, “then obviously we’ll be back to where we were in the 1970s. , when we had hyperinflation and had to depreciate the currency.

Two months later, Rep. Dan Burton (R-Ind.) claimed that “money printing is growing so rapidly that they’re going to have hyperinflation in this country.”

Sen. John Cornyn (R-Texas) said in June “we are looking at the prospect of runaway inflation.”

The following month, Senate Minority Leader Mitch McConnell (R-Ky.) said the stimulus bill had resulted in nothing but “increased unemployment, job losses skyrocketing jobs, higher debt, huge deficits and growing inflation fears.”

The fears turned out to be unfounded, as 2009 actually saw a bit negative inflation.

Nevertheless, after the stimulus bill, President Barack Obama agreed with Republicans that the government should not spend a dollar without cutting a dollar (more out of fiscal correctness than fear of specific inflation) and Democrats agreed swore that every policy they pursued would be theoretically deficit neutral. , including the Affordable Care Act and Unemployment Insurance extensions.

Still, Republicans remained vigilant about the threat of inflation, whether from Congress or the Federal Reserve with its bond purchases and low interest rates.

“Soon we’re going to go from unemployment to an unbelievable level of inflation,” Rep. Todd Akin (R-Mo.) told the House in May 2010. Inflation landed at 1.6% for the year .

In 2011, House Budget Committee Chairman Paul Ryan (R-Wis.) and other Republicans gate Federal Reserve Chairman Ben Bernanke hinted at the possibility of higher inflation through the Fed’s efforts to support the economy, warning that “inflationary momentum can be quick to materialize and painful to eradicate once it has taken hold”. Prices increased by 3.1% in 2011.

“We are less than eight years away where Medicare, Medicaid, Social Security and interest on the debt will eat up every penny of this country’s tax revenue,” Sen. Tom Coburn (R-Okla.) said during a speech in the Senate in January 2013. speech, nine years ago. “It’s less than eight years, if we do it that long, before we have hyperinflation.” That year, inflation was 1.4%.

Even in the Trump years, when the party mostly abandoned the fiscal discipline it demanded of Obama, some Republicans warned that inflation was lurking around the corner. Sen. Rick Scott (R-Fla.) written in 2019 that high federal debt will “inevitably lead to high inflation” one day if Congress does not cut spending.

Sen. Rick Scott (R-Fla.) speaks during an inflation news conference on Capitol Hill on May 26, 2021.
Sen. Rick Scott (R-Fla.) speaks during an inflation news conference on Capitol Hill on May 26, 2021.

Drew Angerer via Getty Images

Republican vigilance over inflation is understandable – rapidly rising prices are an economic problem that affects everyone but particularly burdens those on fixed incomes, such as Social Security recipients whose benefits are adjusted once a year. And it’s an effective policy ― even when inflation is officially low, people think higher prices hurt themprobably because they often face volatile food and gasoline prices that are just components of the overall consumer price index.

For elected Republicans, today’s high inflation is reminiscent of the glory days of Ronald Reagan’s ascendancy amid high inflation and high unemployment. Republicans love that vibe of the Reagan Revolution.

“It’s no surprise that they kind of want to go back to that, and of course, if they’re wrong, it doesn’t matter,” Molly Michelmore, Washington University history professor and Lee and expert in Fiscal Policy and 20th Century Politics.

“You can always say the problem with social spending is inflation,” Michelmore said. “If you’re wrong, who cares? A stopped clock is right twice a day.

Policymakers finally realized that the bipartisan reluctance to spend money to stimulate growth during the Obama years was a mistake that plagued families with excessive unemployment and weak wage growth. When the coronavirus pandemic arrived in 2020, Democrats and Republicans were ready to splash the big bucks, approving more than $3 trillion in aid that year.

Then, after Democrats took power in 2021, Republicans balked at spending more. As Democrats prepared to pass the US bailout, with another round of stimulus checks, additional unemployment benefits and aid to states, Republicans drove inflation higher.

“The Democrats’ COVID bill runs a very real risk of overstimulating the economy, as evidenced by the large increase we’ve seen in the money supply, which could, among other things, drive up the prices of goods that Americans use every day — in other words, inflation,” Sen. John Thune (RS.D.) said in early March.

“Although inflation has been brought under control in recent years, we should not let this lull in inflation lull us into a false sense of confidence that we can spend with impunity without consequences,” said Senator Chuck Grassley ( R-Iowa). days later.

Then as now, Republicans enthusiastically cited the warnings of economist Larry Summers, a former Obama adviser that written in February that the US bailout could “trigger inflationary pressures of the kind we haven’t seen in a generation”.

Republicans told HuffPost that inflation was an easy call last year because Congress had already authorized several trillions of dollars in pandemic relief before Democrats proposed their bill.

“When you put $6 trillion on the fire, that’s what happens,” Cornyn said. “And we had to do some of that because of COVID, but then [Democrats] continued to want to spend a lot more money.

Yet elected Democrats tend to deny that the bailout was a major contributor to inflation, even as the party pivots from its stalled social policy agenda looking for new ways to slow price growth. They also noted that the bill bought record job growth and an unprecedented reduction in child poverty.

“Inflation is not the result of what we did to invest in the economy,” Sen. Jeanne Shaheen (DN.H.) told HuffPost. “Inflation is a result of what happened with COVID and the supply chain.”

Economists agree that supply chain issues have reduced the availability of some goods, pushing up prices. But many also say the extra money Congress has put in consumers’ pockets has amplified the problem. Another culprit? Simple corporate greed, with corporations taking advantage of inflation headlines to increase profits by excessively raising prices.

Senate Majority Leader Chuck Schumer talks to the press as he leaves a lunch with Senate Democrats at the U.S. Capitol on February 17.
Senate Majority Leader Chuck Schumer talks to the press as he leaves a lunch with Senate Democrats at the U.S. Capitol on February 17.

SAUL LOEB via Getty Images

Senate Majority Leader Chuck Schumer (DN.Y.) announced last week that Democrats would roll out new solutions to slow inflation, in addition to their pledge to raise taxes on the wealthy and cut costs drugs by capping insulin spending and giving Medicare more power to bargain with the pharmaceutical industry.

Republicans, for their part, don’t have many ideas of their own, except to remind voters they didn’t support the US bailout and oppose a new wave of social spending.

But with Democrats unable to agree on another major spending bill and Republicans unlikely to accept disinflationary tax hikes, it will likely fall to the Federal Reserve to rein in inflation.

The Fed has already said it will try to slow economic activity this year by ceasing its bond purchases and raising interest rates, which would essentially make it more expensive for households and businesses to borrow money. ‘money. The only downside to the Fed’s approach is that it could cause a recession.

Igor Bobic contributed reporting.


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