Hiltzik: The GOP’s inflation woes

Even if you don’t know from your household accounts that inflation has been hot this year, your local Republican officials and candidates will make sure it’s not a secret.

As the midterm elections loom, inflation is not only the main issue to be whipped by the GOP, but at times it appears to be the party’s only problem.

In a way, this is encouraging. After all, a party that talks so relentlessly about a problem must have a solution. So Republicans have to go all out and provide chapters and verses about their answers to inflation, right?

We have a commitment to America and we will go back to fundamentals.

— Rep. Andy Barr (R-Ky.) explains GOP anti-inflation plan

Alas, no.

Take a look at the Republican election manifesto, House Minority Leader Kevin McCarthy (R-Bakersfield’s recently released “Commitment to America,” without revealing any details. Despite specific and pointed questions from hosts, Republican candidates have also failed to do so during their multiple appearances on the cable talk show.

For example, here is Rep. Andy Barr (R-Ky.) on Aug. 21, when Chuck Todd asked, “Apart from not supporting Joe Biden’s policies, what is the Republican plan to deal with inflation? what?”

“Well, we have a positive agenda. We have a commitment to America and we’re going to get back to the fundamentals. … We don’t need more IRS agents. We need more Border Patrol agents. We have a common sense Plans to lower the cost of living, lower the cost of the pump.”

But what that “common sense plan” was, Barr did not disclose.

This campaign technique for minority parties is not new. It included repeatedly citing an issue and linking it to the ruling party, assuming voters’ urge to “push the homeless out” would lead to electoral victory.

To be honest, that’s usually enough to win; why complicate things by offering specific plans that might produce winners and losers when you can just sit back complacently and let voters assume everyone is going to be a winner?

That’s why Sen. Roy Blunt (R-Mo.), who is retiring this year, delivered a word salad of election hubris on Oct. 10. 23, when CNN’s Pamela Brown asked him about his inflation solution.

After muttering, “Well, really, stabilize the economy,” Blunt jumped to a confident prediction for Election Day. Voters “will hold Democrats accountable.” …I think there’s no question that Republicans will get control of the House, and in a very narrow environment, just like they won’t get control of the Senate. But we still have no control over the government, and poor regulation and poor energy policy will continue to fuel the current inflationary fires. “

Let’s take a closer look at McCarthy’s economic plan, the “Commitment to America,” advocated by Barr as the centerpiece of his party’s anti-inflation plan.

Under the heading “Fighting Inflation, Lowering the Cost of Living,” the document noted that “after more than a year of inflation, Democrats still have no plan to address this issue.”

what is the reason? “Everyone knows that Washington’s wasteful spending fuels inflation,” the document said. “Millions of dollars of taxpayer hard work were sent to luxury resorts and ski resorts, and even stimulus checks were issued to inmates like the Boston Marathon bomber.”

inflation

Since mid-2020, corporate profits (blue line) have soared, pushing up inflation, while worker incomes (green line) have remained stagnant and inflation (red line) has risen.

(Federal Reserve Bank of St. Louis)

However, the “Washington spending” implied by the document was largely allocated by three rounds of pandemic relief and stimulus checks, totaling $802.8 billion in payments to nearly 472 million households.

What the “promise” doesn’t say is that two-thirds of the checks and spending occurred under Donald Trump’s administration.

Among them, a check for $1,400 was made to Boston bomber Dzhokhar Tsarnaev — money the government has moved to seize to help pay fines and penalties following Tsarnaev’s conviction. Should that check symbolize a program that provides aid to nearly every American family?

Whether or to what extent the pandemic stimulus has actually contributed to this year’s inflation is a hot topic of debate among economists. A paper published in March by researchers at the Federal Reserve Bank of San Francisco argued that the stimulus package boosted inflation by 3 percentage points by the end of 2021.

But other economists disagree, arguing that many households don’t spend these checks, but instead deposit them in banks or use them to pay off debt, neither of which is inflationary. Also, the important question is: what happens without the stimulus? “The economy may have slipped into full-blown deflation and slowing growth, the consequences of which will be harder to manage,” the San Francisco Fed said.

It is also true that several developed countries that have not issued generous stimulus and relief measures currently have higher inflation than the U.S., raising further questions about the impact of U.S. spending.

The “Commitment to America” ​​also claims a plan to “restore American energy independence and lower oil prices.” There are several questions. One is that the U.S. has achieved energy independence — the U.S. has been a net exporter of oil nearly every month since the fourth quarter of 2019, and a net exporter of natural gas since mid-2017, according to government statistics.

When McCarthy says he intends to “maximize the production of reliable, American-made energy,” as if that would lower oil prices, he’s blowing steam.

Additional energy production within the U.S. would go directly to international markets, where it would be subject to global price pressures, such as reduced supply from Russia’s invasion of Ukraine and OPEC’s decision to cut production. These are the factors that drive gasoline prices up, not the rate at which U.S. wells are producing.

This isn’t the first time Republicans have faltered on tackling inflation. In 1974, when Gerald Ford succeeded Richard Nixon as president, he was saddled with an annual inflation rate above 12 percent.

import

Republicans say the U.S. needs “energy independence” to reduce inflation, but the U.S. has been a net exporter of oil (pictured) and natural gas since 2019, meaning it is already independent.

(U.S. Energy Information Administration)

Ford’s solution is a “flash inflation now” campaign, which includes urging Americans to “grow more and waste less” to lower food prices and “help save scarce fuel, drive less, and heat less in an energy crisis.” The logo of his campaign is a red lapel button with “WIN” written on it. Rightfully, the movement drew ridicule. But it has more substance than anything the Republican Party has offered recently.

The vacuum at the heart of Republican economic policy is especially troubling now, at a time when the U.S. economy is on the edge. Congress has handed the fight against inflation almost entirely to the Federal Reserve, whose strategy of sharply raising interest rates could cause a recession.

Despite its name, the Inflation Reduction Act was signed into law in August. President Biden’s Resolution 16 includes only a handful of anti-inflation provisions relevant to ordinary households.

One of them is premium assistance for people who buy a health plan under the Affordable Care Act. Another caps out-of-pocket costs for Medicare enrollees at $2,000 a year. A third capped the price of insulin, which has been a target of drugmakers for years, to $35 a month.

These regulations will significantly reduce household spending for millions of Americans. However, the bill did not receive a single Republican vote in either chamber of Congress.

Republican contenders have made some vague promises about economic measures they will take if they win power in Congress. In most cases, this will make the financial situation of tens of millions of households worse, not better.

They will extend the tax cuts they enacted in 2017, when they took control of both houses of Congress and the White House — mostly a giveaway to the rich and corporations, estimated to be worth between $1.5 trillion and $3 trillion over 10 years. There are holes in the U.S. budget — and without any lasting positive impact on economic growth.

They’re talking about cutting benefits for Social Security and Medicare beneficiaries, which is sure to make it harder for these families to make ends meet. They talked about refusing to raise the government’s debt ceiling next year, using it to cut benefits. As I reported, this is playing with fire.

A hard cap on the national debt would trigger unprecedented defaults, which would send interest rates soaring and delay benefit checks, bad for millions of households. In short, this is the antithesis of Sen. Blunt’s “Stable Economy.”

The truth is that the federal government has done a lot to reduce inflation through fiscal and monetary policy. The effect is already visible. Home prices have been falling, largely due to the Federal Reserve’s policy of pushing mortgage rates above 7%. As another component of inflation statistics, car prices have begun to slide.

Another major inflationary factor, the port standoff that began last year as the consumer economy began to open up, has all but disappeared. Container volumes at the Port of Los Angeles this fiscal year are down about 11 percent from last year.

The back-up of container ships waiting to unload at the ports of Los Angeles and Long Beach has dropped from 109 in January to four now, according to Southern California Marine Exchange statistics cited by The Wall Street Journal. The cost of shipping a container from East Asia to the U.S. West Coast has dropped to less than $2,500 from about $20,000 a year ago.

There is no doubt that we can do more. President Biden has slammed oil companies for their massive profit growth, but it’s just one industry. Corporate profits have soared since mid-2020, while average worker earnings have remained subdued — a stimulus to inflation that has received little attention.

Has the Republican Party embraced these ideas? Of course not – corporate management and big oil companies are its patrons. Instead of blaming them, Republicans complained that Social Security beneficiaries were being charged too much while the wealthy stumbled under the burden of the lowest federal marginal tax rate in more than half a century.

If you’re wondering why the party isn’t doing anything about inflation, it’s because anything that actually addresses it in a way that helps the average American will hurt its friends. We can’t have it, can we?

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