Inflation is the main issue for this week’s midterms

November 7, 2022

Montana Economy

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Like a 1970s movie monster, inflation is back and drawing crowds to a polling station near you.

Rising prices are the main concern of voters in this year’s midterm elections, overtaking abortion, crime and other burning issues.

More than one in three voters cited inflation as their most pressing priority, according to the latest NPR/PBS news time/Marist survey. “Preserving democracy” was far behind. Republicans were considered better than Democrats at largely fighting inflation.

The election comes as consumer prices are climbing at nearly the fastest pace in four decades. Annual inflation in September was 8.2%. That’s only slightly down from the 9% rate in June, which was the highest since 1981.

The October consumer price index should be released on Thursday.

Soaring prices have fueled anxiety among Americans, who are paying more for gas, groceries and other necessities.

Inflation was not on the radar two years ago

Inflation was of little concern when President Biden first took office. Although the pandemic triggered isolated price hikes for things like lumber, the overall cost of living was climbing at less than 2% per year.

The incoming administration was more concerned about jobs, fearing a repeat of the slow recovery that followed the global financial crisis. The unemployment rate in January last year was 6.4%, down from nearly 15% in the early months of the pandemic. But with rising COVID-19 cases, the economy had lost 115,000 jobs the month before Biden was sworn in.

Congressional Democrats quickly passed a $1.9 trillion economic relief bill, which included direct payments of $1,400 to most adults, plus expanded unemployment benefits and a new tax credit for children.

As an economic stimulus, it was a success. Employers have added more than 10 million jobs since Biden took office. But Republicans blame the aggressive relief bill — which passed without GOP support — for stoking runaway prices.

“Inflation is caused by reckless spending by Democrats,” Sen. Rick Scott, R-Fla., told NPR. morning edition Last week.

Inflation is a global problem

Other factors undoubtedly contributed to the high inflation, including the lingering effects of the pandemic and Russia’s invasion of Ukraine. Inflation was even higher in the Eurozone and the UK than in the US, mainly due to soaring energy costs linked to the war in Ukraine.

But some prominent Democrats acknowledge that last year’s relief package played a role in overheating the economy and driving up prices.

“Now the tub is overflowing,” said former Treasury Secretary Larry Summers, who warned fellow Democrats against such a situation. results. “And it’s much easier to stop a tub from overflowing than to catch the water.”

The Federal Reserve reacts

For much of the past year, the Federal Reserve believed that prices would cool on their own, once the supply chain issues caused by the pandemic unraveled. But inflation turned out to be higher and more persistent than the central bank had expected. This spring, the Fed began raising interest rates in an effort to dampen demand and control prices.

Since March, the Fed has raised its benchmark rate six times, pushing up borrowing costs for anyone trying to buy a house or car or carrying a balance on a credit card. Fed Chairman Jerome Powell warned last week that rates will likely have to rise even more than expected next year, although increases may come in smaller increments.

The Fed’s crackdown, along with similar moves by other central banks, has heightened the risk of a global economic slowdown.

A GOP advantage

Nearly half of voters polled in the NPR poll say Republicans would do a better job of controlling inflation, compared to just 27% who think Democrats would be more effective. While Republicans capitalized on voter frustration over rising prices, they offered few concrete prescriptions for bringing down inflation.

Asked about the GOP’s strategy on morning editionSenator Scott suggested spending cuts and an increase in national energy production.

“Step one, we need to do in government what families do. You live within your means,” said Scott, who chairs the Republican Senate campaign committee. “On top of that, we need to figure out how to produce energy in this country safely.”

Gasoline prices are a particularly potent symbol of inflation, and President Biden’s approval rating seems to drop every time pump prices rise.

The national average gasoline price hit a record high of $5.01 a gallon in June, when sanctions against Russia sent global crude oil prices skyrocketing. Gas prices have since fallen to around $3.80, according to AAA.

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