How GOP can extend 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 the administration of President Biden 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 pass legislation to make the economy more productive, but any changes would generally take awhile to have an effect.

There are ways 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.

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 COVID-19, 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 mid-March hike in interest rates, spending has been rising fast enough to keep the gap growing between actual spending levels and the pre-COVID trend. In effect, the Fed has not yet 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 inflation.

Republicans could also explore legislation to make the stabilization of spending a statutory goal of the Federal Reserve.

Congress could also remove barriers to energy production, which Republicans are already calling for, and to the automation of ports. Sen. Mike Lee, the Utah Republican, has a bill that applies deregulation to transportation-sector logjams, and another to increase housing supply. These measures would probably make the economy more productive even if inflation subsides.

They would also provide a way for Congress to show it is working to bring prices down.

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

Congress could also consider delaying the spending of some of the money it is devoting to infrastructure projects so more of it happens after labor shortages and supply disruptions ease.

This is hardly an exhaustive list. The point is when Republicans are asked “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.

All of these political considerations are meaningful, however, only on the margins. No matter what politicians 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.