WASHINGTON — With prices rising at the fastest rate since 1982, Republicans are clobbering President Joe Biden and Democrats on inflation ahead of this year’s midterm elections.
Inflation is a potent political issue because it affects basically 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.
Republicans warned last year that the American Rescue Plan, the $1.9 trillion stimulus package signed by Biden in March 2021, would jack up inflation.
In the broadest sense, they were right. Inflation is here. And the cash payments and extra unemployment benefits provided by the American Rescue Plan likely contributed, though there’s lots of disagreement among economists about how much blame the bill deserves.
Republicans, however, did not predict the chip shortages, logistical bottlenecks nor the shift in consumer spending from services toward physical goods ― key causes of price increases since last year.
So how did Republicans know inflation was coming, and why didn’t Democrats listen? Probably because crying about inflation is something Republicans always do, regardless of what is going on, and many past warnings failed to pan out.
Back in 2009, as the economy slinked out of the Great Recession, many Republicans said an $800 billion stimulus bill would spur a wild rise in prices.
Sen. John McCain (R-Ariz.) said that January on the Senate floor that if Congress didn’t find some way to deal with the mounting federal debt, “then obviously we will find ourselves back in the situation we were in the 1970s, when we had hyperinflation and had to debase the currency.”
Two months later, Rep. Dan Burton (R-Ind.) claimed that “the printing of money is going up so rapidly that they are 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 “higher unemployment, soaring job losses, higher debt, huge deficits and growing fears about inflation.”
The fears proved unfounded, as 2009 actually saw slightly 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 rectitude than specific inflation fears) and Democrats vowed that every policy they pursued would be nominally deficit-neutral, including the Affordable Care Act and extensions of unemployment insurance.
Still, Republicans remained vigilant about the threat of inflation, whether from Congress or the Federal Reserve with its bond-buying and low interest rates.
“Before long, we are going to jump from unemployment to an incredible level of inflation,” Rep. Todd Akin (R-Mo.) said on the House floor in May 2010. Inflation landed at 1.6% for the year.
In 2011, House Budget Committee Chairman Paul Ryan (R-Wis.) and other Republicans grilled Federal Reserve Chairman Ben Bernanke about the possibility of inflation rising from the Fed’s efforts to prop up the economy, warning “the inflation dynamic can be quick to materialize and painful to eradicate once it takes hold.” Prices increased 3.1% in 2011.
“We are less than eight years away, where Medicare, Medicaid, Social Security and interest on the debt will consume every penny of tax revenue this country has,” Sen. Tom Coburn (R-Okla.) said in a January 2013 Senate floor speech, nine years ago. “That is less than eight years away, if we make it that long, before we have hyperinflation.” That year saw 1.4% inflation.
Even in the Trump years, when the party mostly gave up on the fiscal discipline it demanded from Obama, some Republicans warned that inflation lurked around the corner. Sen. Rick Scott (R-Fla.) wrote in 2019 that high federal debt “will inevitably lead to high inflation” someday if Congress didn’t cut spending.
The Republican vigilance around inflation is understandable ― swiftly rising prices are an economic problem that affects everybody but especially burdens people with fixed incomes, such as Social Security recipients whose benefits are adjusted once per year. And it’s effective politics ― even when inflation is officially low, people believe higher prices are hurting them, probably because they frequently confront volatile food and gasoline prices that are merely components of the overall consumer price index.
For elected Republicans, today’s high inflation hearkens back to the glory days of Ronald Reagan’s ascendancy amid high inflation and unemployment. Republicans love that Reagan Revolution ambiance.
“It’s not surprising that they sort of want to go back to that well, and of course, if they’re wrong about it, it doesn’t matter,” Molly Michelmore, a history professor at Washington and Lee University and an expert on 20th century fiscal policy and 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 eventually realized that the bipartisan hesitation to spend money to boost growth in the Obama years was a mistake that saddled families with excessive joblessness and weak wage growth. When the coronavirus pandemic arrived in 2020, Democrats and Republicans alike were ready to spend big money, approving more than $3 trillion in relief that year.
Then, after Democrats took power in 2021, Republicans balked at more spending. As Democrats geared up to pass the American Rescue Plan, with another round of stimulus checks, extra unemployment benefits plus aid to states, Republicans brought up inflation.
“The Democrats’ COVID bill runs a very real risk of overstimulating the economy, as evidenced by the large increase we have seen in money supply, which could, among other things, drive up prices on the goods that Americans use every day – in other words, inflation,” Sen. John Thune (R-S.D.) said at the beginning of March.
“While inflation has been subdued in recent years, we shouldn’t let that lull in inflation lull us into a false sense of confidence that we can spend with impunity with no consequences,” Sen. Chuck Grassley (R-Iowa) said a couple days later.
Both then and now, Republicans have enthusiastically cited warnings from the economist Larry Summers, a former adviser to Obama who wrote in February that the American Rescue Plan could “set off inflationary pressures of a kind we have not seen in a generation.”
Republicans told HuffPost inflation was an easy call last year because Congress had already authorized several trillion in pandemic relief before Democrats moved 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] have continued to want to spend a lot more money.”
Still, elected Democrats tend to deny that the Rescue Plan was a major contributor to inflation, even as the party pivots from its stalled social policy agenda to a search for new ways of slowing price growth. They’ve 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 (D-N.H.) told HuffPost. “Inflation is the result of what happened with COVID and the supply chain.”
Economists agree that supply chain problems reduced the availability of certain goods, thereby pushing up prices. But many also say the extra money Congress put in consumers’ pockets magnified the problem. Another culprit? Plain old corporate greed, with companies taking advantage of headlines about inflation to boost profits by excessively raising prices.
Senate Majority Leader Chuck Schumer (D-N.Y.) announced last week that Democrats would roll out new solutions to slow inflation, in addition to their pledge to hike taxes on the rich and reduce drug costs by capping out-of-pocket insulin expenses and giving Medicare more power to haggle with the pharmaceutical industry.
Republicans, for their part, haven’t got many ideas of their own ― except to remind voters that they didn’t support the American Rescue Plan and that they oppose another round of social spending.
But with Democrats unable to agree among themselves on another major spending bill, and Republicans unlikely to go along with disinflationary tax hikes, it will likely be up to the Federal Reserve to put the brakes on inflation.
The Fed has already said it would try to slow economic activity this year by ceasing its bond purchases and raising interest rates ― essentially making it more expensive for households and companies to borrow money. The only downside of the Fed’s approach is that it could cause a recession.
Igor Bobic contributed reporting.