GOP sees inflation as winning issue
Republicans are looking at surging inflation as a winning issue as the party molds its attack lines against President Biden and down-ballot Democrats ahead of the midterms.
Annual inflation jumped to 6.2 percent in October, according to data released Wednesday by the Labor Department, reaching the highest level in more than 30 years. Prices rose 0.9 percent last month alone, marking the third straight month of accelerating inflation.
Republicans have spent months blaming Biden and Democrats for rising food and gas prices, and inflation was a central focus of Gov.-elect Glenn Youngkin’s (R) successful bid for the Virginia governor’s mansion. While Democrats are hoping to celebrate the passage of Biden’s bipartisan infrastructure package and turn the focus to bright spots in the economy, the GOP is betting that Americans will care most about the day-to-day pinch they feel at the store or the pump — and that they’ll blame Biden’s agenda.
“American families are facing record-setting costs for everyday goods, from gas to groceries, yet Joe Biden continues to push for trillions of dollars in wasteful spending and the largest tax hike in decades,” Republican National Committee Chairwoman Ronna McDaniel said in a statement.
The GOP telegraphed earlier this year that they were going to make inflation a key issue in the midterms, with the National Republican Congressional Committee rolling out ads on it in July.
Republicans saw the first signs of success on the issue in Virginia, last week which has led to unification in the party on messaging surrounding the issue.
“The entire Republican ecosystem is united on this fact because it’s a leading issue amongst voters,” said one GOP strategist.
Earlier this month, the Club For Growth launched an ad campaign targeting a group of moderate Democrats, pointing to inflation while urging them to oppose Biden’s social spending plan. On Thursday, The Coalition to Protect American Workers, a group led by ex-Vice President Mike Pence‘s former chief of staff, Marc Short, launched a six-figure ad campaign targeting some of the same lawmakers over rising prices.
And it’s not just Republicans leading the ticket that are zeroing in on the issues. Republicans down the ballot say inflation is a prime example of a kitchen table issue.
“We will continue to talk about those issues, continue to talk about the failures of the Biden administration to fix that and to help that,” said Dee Duncan, the president of the Republican State Leadership Committee.
Polling suggests such attacks could be effective.
Biden’s general approval rating and voters’ views on his handling of the economy have plunged since the summer while prices rose. While job growth, the stock market, consumer spending and household savings remained strong, the emergence of the delta variant of the coronavirus in late July snarled supply chains and threw more fuel onto inflation.
Confidence among voters in the state of the economy dropped to its lowest level since January in October, according to a Gallup poll, despite a record high 74 percent of respondents saying it was a good time to find a quality job. The number of respondents who cited high prices as the most important issue facing the U.S. also jumped from 1 percent in September to 5 percent last month.
Rising prices overshadowed other areas of strength in the economy, particularly as steep jumps in food and energy prices stretched household budgets for cash-strapped families. Food prices rose 5.3 percent in the year leading into last month, according to the Labor Department, energy prices soared 30 percent, and gasoline prices jumped a whopping 49.6 percent in the same time.
“For most Americans, even small cost increases are extremely painful. There’s much less margin of error,” said Karen Petrou, managing partner at Federal Financial Analytics and author of “Engine of Inequality: The Fed and the Future of Wealth in America”.
“Thirty years ago, America had a middle class with better ability to absorb cost increases and it was very, very painful. And in 2021 we don’t have the middle class anymore with that ability to cushion a few shocks.”
The U.S. is one of many wealthy nations struggling with higher inflation as consumer demand overwhelms supply lines still struggling to recover from the onset of the pandemic. Most economists say there is little Biden can do himself to cool off a global rise in prices, which will likely wane as the pandemic fades.
Even so, the steep jump in prices has turned voters against Biden and Democrats at a dangerous time.
“These are the same voters who Trump sought in every way he [by raising] cultural issues and they voted for Biden last year. What’s different? It’s the economy,” Petrou said.
Democrats, however, say that the passage of legislation like Biden’s infrastructure package will ultimately alleviate the effects of inflation.
“I think that a lot of what we are doing here is actually going to curb inflation over the next few months,” said Rep. Susan Wild (D-Pa.) during a press call Wednesday.
Wild said that people reentering the workforce and getting the supply chain back in order “are going to curb the inflation much more than anybody’s expecting.”
“I hope that nobody is going to try to tie the passage of these two bills to the current inflation rates because there is simply no relationship,” she said.
But that’s exactly what Republicans are working to do, tying rising prices to “reckless” government spending.
“With Democratic governance it’s probably going to be the new normal, that’s what America has to waken up to,” said Sen. Ron Johnson (R-Wis.), who has not yet announced whether he will run for reelection next year.
The inflation spike poses an immediate threat to Biden’s “Build Back Better” plan, the $1.75 trillion social services and climate bill Democrats are aiming to pass through budget reconciliation.
The process allows legislation to pass through the House and Senate with simple majorities, but faces growing threats from conservative Democrats such as Sen. Joe Manchin (D-W.Va.), who sounded the alarm about spending more money amid rising prices.
“From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day,” Manchin tweeted Wednesday.
White House officials and Democratic lawmakers have insisted that the Build Back Better plan will fight inflation by lowering the price of child care and prescription drugs. They’ve also argued that the infrastructure bill will help expand the workforce and boost productivity through sorely needed upgrades.
While any deflationary impact could take months, if not years, even economists critical of the White House’s handling of inflation say the dual infrastructure bills are unlikely to spur further price growth.
“The 10 years of the two spending bills together, A, are less than the one year of what they did last spring and, B, unlike what they did last spring, are paid for by tax increases,” said former Treasury Secretary Larry Summers, a Democrat who has blamed high inflation in part on Biden’s stimulus plan.
Democrats have proposed a series of tax increases on wealthy individuals and corporations to pay for the Build Back Better plan. Covering the cost of new federal spending with revenue typically limits its impact on inflation.
“I don’t think that’s an inflation problem. I think a lot of it is vitally needed investments in the future of our country,” Summers said.
And Petrou, unlike Summers, believes the March stimulus bill played “remarkably little” role in stoking inflation.
“That’s not the spending that drives demand. It’s giving families a little bit less financial fragility,” Petrou said.
Progressive supporters of Biden’s agenda have also sought to highlight the ways the March stimulus bill is helping many families cover the higher costs spurred by inflation. Along with another round of direct stimulus checks, the American Rescue Plan expanded the child tax credit, and allowed families to collect those payments each month.
The relief law also increased the maximum credit amount for 2021 from $2,000 per child to $3,600 for children under age 6 and $3,000 for children ages 6 and older. It also made the credit fully available to the lowest-income families.
“That is covering the increases in the grocery bills. That is so important,” said Claudia Sahm, former Federal Reserve research director, in an interview with “Rising” on Hill.TV.
“Congress knew with the Rescue Plan that we would need a lifeline through this pandemic,” she continued. “This money going to children, it’s an investment in our future. There is no better money we can spend.”