Finance

Here’s how a GOP-controlled House might tackle inflation

Republicans are expected to take back the House majority in next month’s midterm elections, and they are already signaling steps they would take to try to solve inflation, which is seen as the biggest issue in the November races.

The GOP could have limited power with just the House majority, and even if the party takes back the Senate as well, it is unlikely to have a filibuster-proof majority.

President Biden’s veto pen is another factor, meaning Republicans may need to compromise with the White House and Democrats to enact their policies.

Republicans have given signals about certain areas they intend to focus on, though the specifics of their anti-inflation plans are slim.

Here are a few things the GOP is thinking about doing to counter inflation.

Pull back on spending

(File: Getty)

Republicans have railed against trillions in Democratic-backed spending in areas like coronavirus relief, student loans and nondefense funding, while framing the policies as part of a pattern of unchecked government spending.

The party has made clear its opposition to the American Rescue Plan, a sprawling $1.9 trillion coronavirus relief and stimulus package passed without GOP support last year, as well as the Democrats’ signature Inflation Reduction Act and the Biden administration’s sweeping student loan forgiveness plan.

Republicans are also becoming increasingly confident of their prospects of shaping government funding for fiscal 2023, as more polling has shown the party is gaining an upper hand in key races that could determine control of Congress.

However, even as they attack nondefense spending, many Republicans have pressed for higher funding for defense, pointing to the rising costs of materials.

Debt ceiling

Raising the debt ceiling is likely to be a huge fight in Washington if the GOP takes back the House.

Raising the debt ceiling has little direct effect on inflation. While government spending has some connection to inflation, the debt ceiling must be raised to account for past spending by Congress.

Congressional lawmakers cut a deal to raise the debt ceiling by $2.5 trillion in December 2021, days before the predicted default date. The action allowed the U.S. to avoid default until at least 2023, when either another increase or a suspension will likely be needed to prevent economic turmoil.

Republicans could use the new deadline as leverage in negotiations to cut spending, holding up any action on the debt ceiling to try to force concessions from Democrats. GOP lawmakers went down a similar path in 2011, when the House Republican majority held changes to the debt ceiling hostage in an effort to secure deficit cuts.

The standoff led Standard & Poor’s to downgrade the U.S. credit rating for the first time to AA+. Before then, it had never dropped below AAA.

Asked by Punchbowl News if Republicans would bring entitlement reforms into the debate over the debt ceiling, House Minority Leader Kevin McCarthy (R-Calif.) said he would not “predetermine” anything, sparking fears that programs like Social Security and Medicare could be at risk.

He sought to tame those concerns one day later, telling CNBC in an interview that he “never mentioned Social Security or Medicare,” while doubling down on his statement that a change in behavior must take place in relation to the debt ceiling.

Energy

An undated photo provided by the Department of Energy shows crude oil pipes at the Bryan Mound site near Freeport, Texas. (Department of Energy via AP)

House Republicans are pushing energy independence as a way to lower costs.

Gas prices have fluctuated in recent months, hitting a peak of more than $5 a gallon on average nationally in June before falling back to $3.82 a gallon on Friday, according to AAA.

Prices at the pump shot up in part because of Russia’s invasion of Ukraine. Concerns over gas prices heightened this month after OPEC and its oil-exporting allies, including Russia, announced a 2 million barrel per day reduction in oil production.

In the House GOP conference’s midterm messaging and policy platform, dubbed the “Commitment to America,” Republican lawmakers vowed to “regain American energy independence and lower prices at the pump” by maximizing the production of domestic-made energy and slashing the permitting process to lessen the U.S.’s reliance on other countries.

“The hardworking people of this country are paying the price. Everything is more expensive here at home and our enemies are emboldened. President Biden must reverse course and take meaningful action to unleash American energy,” Rep. Cathy McMorris Rodgers (Wash.), the top Republican on the House Energy and Committee Committee, said in a statement following the OPEC+ announcement.

House Minority Whip Steve Scalise (R-La.) told “Fox News Sunday” that if the U.S. produced more energy domestically, “we would be lowering energy costs like we had two years ago.”

The prospects of gas prices decreasing through energy independence in the short term, however, are slim. Many decisions about whether to drill for oil are made by private companies rather than government policy.

And when it comes to oil the federal government does have authority over, new onshore drilling leases typically take roughly 4.5 years on average to deliver oil to the pump.

Supply chain

Supply chain issues have been seen as a major cause of inflation, though more recently they have been seen as less of an issue.

In a policy agenda unveiled by top House Republicans last month, leaders focused on strengthening the nation’s supply chains. 

“The frightening supply shock of baby formula this year was the tip of the iceberg of a broken supply chain that has increased costs and left store shelves empty,” the agenda states. “Record inflation is driving increases in the price of everyday essentials, while our country remains dangerously reliant on foreign countries like China for critical supplies, medicines, and technology.”

The agenda doesn’t provide more information for the push, though the effort comes a year after more than 100 Republicans penned a letter to Biden opposing certain regulatory actions and social spending they linked to supply chain issues.

Taxes

An IRS Form 1040 for 2021 is arranged for a photo illustration on Friday, April 15, 2022.
An IRS Form 1040 for 2021 is arranged for a photo illustration on Friday, April 15, 2022.

Republican leaders have also set their sights on tax changes, with some pushing for an extension to tax cuts included in former President Trump’s 2017 signature tax law.

According to The Washington Post, provisions of the law Republicans are eyeing to make permanent include language pertaining to tax rates for individuals. The paper also reported interest in doing away with certain tax increases for corporations.

In the House GOP’s policy agenda to fight inflation and lower living costs, leaders push for “pro-growth tax and deregulatory policies” that they argue would “increase take-home pay, create good-paying jobs, and bring stability to the economy.”

McCarthy has also reportedly signaled support for a push by Rep. David Schweikert (R-Ariz.) to make other portions of Trump’s tax law long-lasting. 

At the same time, Republicans have come out against provisions pushed by Democrats seeking to pay for funding in areas like health care and climate with tax increases targeting wealthy corporations and individuals — and some have held out hope for further challenges to those measures as well.

Updated at 8:45 a.m.

Tags Biden Coronavirus debt ceiling inflation Kevin McCarthy Supply chain problems
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