Republicans can extend their midterm inflation advantage

Inflation is likely to be the most powerful issue working for Republicans in this year’s congressional elections. Public concern over it has been rising fast. Republicans can plausibly blame President Joe Biden’s administration for making the problem worse by spending too much money on a pandemic stimulus program he pushed through Congress last year, and for not taking it seriously as it emerged.

But there isn’t much that Congress can do to affect the course of inflation in the short term. The Federal Reserve is in charge of monetary policy. Congress can

(in principle!) pass legislation to make the economy more productive, but any changes would generally take awhile to have an effect.

That’s only a small political inconvenience for Republicans. Voters are more likely to want to register their anger over inflation than pore over any candidate’s plans to address it. (Elections are a blunt instrument for public control of the government.)

There are also ways that Republicans can contribute to bringing inflation down. If they did, they could both perform a useful service for the country and increase their political advantage on the issue, at least a little.

The first is simply to support monetary tightening. A large portion of recent inflation has been caused by excessive spending throughout the U.S. economy. During the expansion prior to the arrival of COVID19 two years ago, spending had grown by a bit less than 4% a year. Over the past year it has risen more than 10%.

Even after the Federal Reserve’s March hike in interest rates, spending has been rising fast enough to keep the gap growing between actual spending levels and the pre-COVID-19 trend. By that measure, the Fed has not yet, in effect, tightened at all.

It should be encouraged to tighten money both by raising interest rates further and, maybe more important, by announcing that its goal is to bring spending levels back to the trajectory they were on before the burst of inflation.

Central bankers are sure to face pressure to ease off, especially if tightening leads to higher unemployment. Republicans should exert countervailing pressure, pointing out that getting inflation under control is the only way to achieve sustainable high employment. The Fed has made the eventual tightening more painful by delaying it, and should not delay further. Republicans could also explore legislation to make the stabilization of spending a statutory goal of the Federal Reserve, giving that goal more credibility.

And while no one should oversell how much or how fast policy changes can address inflation by expanding supply, some such changes are worth pursuing. Former President Donald Trump’s tariffs on steel and aluminum never made much sense as either a national security or job protection measure, and his tariffs on China have largely failed to achieve their objectives. Abandoning them would, as the Peterson Institute for International Economics puts it, “provide a temporary downward shock to prices.” (It’s worth noting, however, that lifting the tariffs on China would require mounting an argument to win over skeptics.)

Congress could also remove barriers to energy production — something Republicans are calling for — and to the automation of ports. Sen. Mike Lee, R-Utah, has a bill that applies deregulation to transportation-sector logjams, and another one to increase housing supply. These measures would probably make the economy a bit more productive even if inflation subsides. They would also provide a way for Congress to show that it is working to bring prices down.

Finally, Republicans should block proposals that would make inflation worse. Many economists think widespread student debt relief would have this effect, and that the Democrats’ “Build Back Better” spending legislation would as well.

Congress could also consider delaying the spending of some of the money it is devoting to infrastructure projects so that more of it happens after labor shortages and supply disruptions ease. That would produce more infrastructure improvement per dollar spent.

This is hardly an exhaustive list. The point is that when Republicans face the question, “What are you going to do about inflation?” they can offer many partial answers. Democrats would be wise to go along with some of these ideas, too, and even to propose them first. But some of them, such as the ones that involve taking on unions, are a more natural fit for Republicans. All of these political considerations are meaningful, however, only on the margins.

No matter what politicians in either party do, the cost of living is going to be front of mind for voters this fall.

They’re going to take out their frustrations on the party in power.