The politics of inflation: Can Democrats buck history?

Two years ago, Alex Garcia – along with nearly everyone he knew in Los Angeles – voted for Joe Biden. 

“I was [once] as far left as they came,” the professional bassoonist and music instructor says, talking on the phone in a spare hour between teaching a class and playing in an evening opera performance. “But this year I’m probably considering voting Republican.”

The reason? Inflation. 

“We’re all feeling it,” says Mr. Garcia, who drives back and forth to Las Vegas at least once a month for work. “Your energy bill is more expensive; gasoline is more expensive. You get nickeled and dimed everywhere, and those things add up. After a while, it’s just like, ‘How long are we willing to put up with this?’”

Two weeks before Election Day, most Americans are pessimistic about the economy – with inflation leading the list of economic concerns.

After weeks of touting legislative wins aimed at helping struggling Americans, President Joe Biden has gone negative, training his sights on a Republican Party that appears poised to take over one if not both houses of Congress. A GOP victory on Nov. 8, he says, would result in efforts to cut Social Security and Medicare, leading to a likely government shutdown, a risk of default on the national debt, and even worse inflation.

“Republicans are doubling down on their mega MAGA trickle-down economics that benefits the very wealthy,” President Biden said this week, referring to former President Donald Trump’s “Make America Great Again” slogan. Mr. Biden also continues to insist that his party is on the right track, “building a better America for everyone.”

But the economic messaging – including efforts to blame inflation on others, such as Russian President Vladimir Putin – may not help Democrats much, political strategists say. 

“The default setting in American politics since the New Deal is that presidents and their political parties are held responsible for the performance of the economy – whether they are or not,” says William Galston, domestic policy adviser in the Clinton White House. 

The view from the farmers market

The economy is the top issue for voters, with 79% saying it will be “very important” to their vote, according to the Pew Research Center. 

And while the White House can point to strong employment numbers, that may be of little comfort to many, given that the cost of living has risen noticeably. In September, inflation came in at 8.2% year over year, and Americans are paying higher prices for everything from food to consumer goods to energy.

At the same time, 30-year fixed-rate mortgages now average 7.16%, the highest level since 2001, pushing plans to buy a home off the table for many Americans.

Tyler Hirsch is one of them. As the late morning chill thaws at Copley Square farmers market in Boston, Mr. Hirsch waits for his first customers to arrive. Business is slow, with few passersby seeking his pad thai meal kits. 

Mr. Hirsch says sales have been unusually quiet for some time now. Late October is typically when he closes out the busiest time of the year, but this fall “we just never saw it.”

He blames what he sees as the onset of a likely recession, prompted by the federal government’s response to high inflation. Soaring prices were bad enough for someone in the food industry. But now his main source of frustration is the Federal Reserve’s multiple interest rate hikes since March. 

The vendor had been hoping to buy a house, but given the current situation, “it’s not going to happen anytime soon.” 

“The cure is worse than the actual inflation,” he says. “It feels like they’re purposefully squeezing us.” 

Neither political party has ever satisfied Mr. Hirsch entirely, and he’s voted back and forth over the years. But this year, his mind has been made up for months.  

“I’m voting R down the ticket,” he says.

“Whip Inflation Now”  

Anyone of a certain age may remember President Gerald Ford speaking from the Rose Garden wearing a button that said “WIN” – “Whip Inflation Now.” 

The oil shocks of the early 1970s had produced inflation topping 12%, and in the summer of 1974, President Ford faced pressure to bring it down. “To help save scarce fuel in the energy crisis, drive less, heat less,” he told Americans.

The effort was ridiculed. 

“It’s viewed – even by Republicans who worked with him, and I’ve interviewed some of them – as one of the most colossal public relations failures of all time in a presidency,” says Russell Riley, a historian at the University of Virginia’s Miller Center. 

Today, amid intense polarization, many voters may well stick with their usual partisan habits, even with high inflation. Dan Wilson, a Democrat from Georgia who ran for Congress in 2020, can’t imagine anyone in his community voting any differently from previous elections.

“I have not stumbled across that unicorn yet,” says Mr. Wilson, a retired artist, writer, and teacher. Most political viewpoints in his heavily Republican county were baked in a long time ago, he says. “I don’t think inflation is going to change that vote.”

Nor will Mr. Biden be resurrecting the WIN button anytime soon.

But he’s tried other ways either to deflect blame or show the American people he’s on the case. He cites “corporate greed,” and has repeatedly blamed the Russian president, whose war on Ukraine has skewed energy markets, by referring to “Putin’s price hike.” 

The Biden administration deliberately named its big legislative package including tax reform, lower prescription drug prices, and clean energy investment the Inflation Reduction Act. But with inflation still near 40-year highs, the public seems unconvinced. 

Administration officials’ early insistence that inflation was “transitory” – despite pushback by some high-profile Democratic economists, such as former Treasury Secretary Larry Summers and former Council of Economic Advisers Chair Jason Furman – has also hurt the Biden team’s credibility. 

Much of the blame for inflation goes to pandemic-era overspending by the government – including the $1.9 trillion American Rescue Plan stimulus bill of 2021 – and the Federal Reserve’s failure to raise interest rates soon enough, says Veronique de Rugy, a political economist at the Mercatus Center at George Mason University. 

In addition, she says, “there’s been no talk whatsoever about repaying the debt, which is actually fairly unique in our history.”

Like many economists, Professor de Rugy predicts the U.S. is heading into recession, though not immediately. Third quarter numbers due out Thursday are expected to show positive economic growth. But when recession does hit, she says, “there will be no soft landing.” 

Some argue the Fed’s failure to start raising interest rates sooner may have had a political dimension.

Only this past spring, after Federal Reserve Chair Jerome Powell had been confirmed by the Senate for a second term, did the Fed start raising rates, Harvard economist Kenneth Rogoff notes in the journal Foreign Affairs. 

“If the administration had wanted the Fed to raise interest rates sooner, as some later argued it did, the right move would have been to reappoint Powell in the summer of 2021, giving him a clear mandate to act as the Fed saw fit,” writes Professor Rogoff.