IInflation is fast becoming a problem for the Democratic Party and President Joe Biden. He needs to get a hold of it before it jeopardizes his broader agenda and jeopardizes his chances of taking control of the Congress in the mid-term elections next year. As for how they think about how to address it, one thing is certain: what they’ve been doing so far isn’t working. A recent survey found that two third Americans disapprove of how Biden is handling inflation, and the same numbers consider the issue “very important” in their evaluation of his presidency. Of those Americans who are concerned about the state of the economy, nearly nine out of 10 ranked inflation as a cause. Clearly something has to change.
But inflation is a complex product of economics and public psychology, which is also devilishly difficult to understand, and even more difficult to control. Presidents have few tools to tame it, and those with them can backfire. Inflation of the 1970s crippled Gerald Ford’s presidency, and Jimmy Carter was doing the same until he opted for an extreme cure—installing a chair of the Federal Reserve that dramatically reduced interest rates. boosted inflation, staved off inflation, but plunged the economy into a deep recession. Handed over the White House to Ronald Reagan. These experiences left inflation with a reputation as a presidency-killer, eventually killing the patient with either the disease or the medicine taken to combat it.
Despite this, Democratic Party elites have been slow to take the latest round of inflation as seriously as they should. US policymakers haven’t had to deal with inflation levels so much for 30 years, and it shows. Many took the message that inflation was “temporary”, a temporary consequence of the economy slamming back into high gear as the country emerged from the coronavirus pandemic. Some liberals have also attacked those warning about rising prices, marking their concerns as an attempt to undermine support for Democrats’ plans to advance social welfare and spend more to tackle climate change. has done.
Whatever the economic merits of the argument – and many economists still expect inflation to fall soon – this reaction has been politically toxic. Democrats run the risk of becoming out of touch on an issue of profound concern to many Americans. To change behavior, they need to communicate to voters that they feel their pain and that they are fighting to make things better.
There are already signs that Democrats are starting to get it from the president. Biden recently gave a speech on the topic and announced the release of 50 million barrels of oil from the US Strategic Petroleum Reserve, an effort to lower gas prices at the pump. He also pointed fingers at oil companies for charging consumers higher prices even as wholesale oil prices have declined in the past few weeks.
But Democrats should do more to point the finger at the businesses that are helping to inflame the problem. wall street journal reports that companies in many different sectors are using this inflationary increase as a cover to raise prices faster than their costs, essentially betting consumers will not object when they are already Just seeing an increase in prices. According to the report, nearly two out of three large publicly traded US companies have seen larger profit margins this year than the same period in 2019. Inflation may hurt consumers, but it’s a booming year for Corporate America.
Democrats must use all means of government to uncover and combat these abuses. As Biden is finding out, public anger over inflation is directed toward the incumbent president – and the only way to survive may be to redirect it to a more appropriate target. The Presidential Bully Pulpit can be used to uncover corporate misconducts and regulatory investigations, such as a already announced In the oil and gas sector, industries can be held accountable and potentially illegal practices can be combated by the FTC. Nor should the Democrats stop here. They control both houses of Congress and should especially consider hearing Congress to name and shame arrogant value-gayers.
Whether any of these measures will actually work for lower prices is an open question. But the only responsible thing to do is to try. Corporate price hike risk is kicking off an inflationary spiral in which the initial causes of rising prices become secondary to the general feeding frenzy, and everything that can be done to discourage it is healthy. The administration’s actions may also serve to lower consumer expectations of inflation in the future, reducing the risk of a spiral. Because the media narrative is driven by inflation that has already occurred, reassurance remains important even after prices have stabilized.
But even though we shouldn’t hold our breath for these actions to really slow the rate of price rise, it is important to show leadership on this issue because this is what concerned voters want and deserve. It is smart politics to be seen acting and pointing the finger at those who blame, especially if this inflationary battle proves to be truly fleeting and prices begin to slide next year.
In the meantime, Corporate America has to decide whether it really wants to undermine the Democrats and hand the management of the economy back to Donald Trump’s party. With the modern Republican Party increasingly a party of incompetence and ignorance, self-restraint may be the better option. As Democrats should try to remind Price-Gauger, lower profits now will help everyone down the road.
Andrew Gotthorpe is a United States historian at Leiden University, and host of the podcast America Explained.