Inflation and Politics, a Toxic Mix

WE’RE OLD ENOUGH TO REMEMBER the 1970s, when the economy — and politicians — were clobbered by inflation. It’s something consumers understand because the evidence of higher prices is apparent every day, and now it’s a growing threat to incumbents.

POLLTAKERS WILL TELL YOU that the three signs of inflation that most worry consumers are the red-hot housing market, higher gasoline prices, and rising food prices, especially for meat, which is in short supply and increasingly expensive.

ECONOMISTS WILL TELL YOU that gasoline and food prices are “transitory,” but consumers simply see higher prices, and they want wage hikes. Many companies — led by Bank of America, with its $25 minimum wage — are complying; some firms are offering sign-up bonuses.

MANY REPUBLICANS ALSO REMEMBER THE 1970s, and the damage that inflation inflicted on President Jimmy Carter. So Republicans see a juicy issue for the 2022 elections — inflation, which they blame on a spending binge by Joe Biden.

NO ONE EVER CLAIMED that politics is fair; blaming Biden for inflation seems like a stretch, with the economy emerging from a pandemic in un-charted waters. It will take months for the economy to return to normal, so inflationary pressure is inevitable this summer in a wide range of commodities — from corn to lumber to copper.

IS IT BIDEN’S FAULT that semiconductor chips are in short supply? The world’s major producer, Taiwan, is suffering from an epic drought, and the manufacture of chips depends on ample supplies of water.

BUT BIDEN AND THE DEMOCRATS are vulnerable to charges that their spending binge has heated up inflation, particularly in the labor market. Gasoline and meat prices eventually will decline, but there’s a dire shortage of workers to deliver those products.

THE LONG KNIVES WERE OUT this spring for the former Treasury Secretary, Larry Summers, who is warning that the Federal Reserve and the Biden Administration’s fiscal policies could keep inflation high. Summers, who has an IQ — and an ego — in the stratosphere, has largely been dismissed by fellow Democrats.

SUMMERS KNOWS THAT INFLATION CAN BE MODERATED by less accommodative policies from the Federal Reserve, but Chairman Jerome Powell is nowhere close to raising interest rates. Of course, Powell doesn’t have to run for re-election next year; those who do will face consumers who see surging prices everywhere — and want higher wages to make up the difference.

Related: The Flaw in Biden’s Budget Proposal: How to Pay for It

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