GOP cites inflation as political issue
WASHINGTON — Gas prices are past $3 per gallon in much of the nation. The cost of used cars and new furniture, airline tickets, department store blouses, ground beef and a Chipotle burrito are on the rise too.
Many economists say the price increases are fueled by the aftereffects of a pandemic and probably won’t last. But Republicans are hoping to storm into next year’s midterm elections arguing that steep government spending under President Biden and a Democratic-controlled Congress has triggered inflation that will ultimately hurt everyday Americans.
The economic reality is more complicated. Still, with Republicans only needing to pick up a handful of seats to regain the House and Senate, the party increasingly sees the prospect of sustained higher prices as a way to connect policies made in Washington with the experiences of voters whose pocketbooks may be feeling the strain.
Rep. Jim Banks (R-Ind.) said his constituents have “seen the higher prices on gas in particular, but also groceries and the cost to keep their businesses running.” Such voters, he said, “know, intuitively, that this is due to Democrats’ economic agenda and big spending plans.”
Consumer prices rose 5% over the previous 12 months, the largest one-year increase since 2008. Excluding more volatile items such as food and energy, prices were up 3.8% over the past year — the biggest 12-month jump since 1992.
Those leaps were driven by comparisons to the pandemic-hampered 2020 economy, but nonetheless show prices climbing sharply, with the cost of used cars rising 7.3% in May and food costs increasing nearly half a percentage point over the same period. Gas prices have risen from a nationwide average of $2.48 to $3.13 per gallon under Biden — the first time since 2014 that it has topped the $3 threshold.
Former Federal Reserve economist Claudia Sahm said this year’s inflation rates are likely to remain far higher than usual, but that’s chiefly due to the pandemic pushing inflation uncommonly low last year.
There’s also a boom in consumer spending due to pent-up demand as the virus recedes and the lingering effects of disruptions to global supply chain, she said.
An example Sahm pointed to is a virus-triggered shortage of semiconductors that has slowed production of new cars and helped used vehicle prices spike, at least temporarily.
Others are playing down the risk of price gains being sustained because many were caused by supply bottlenecks set to ease as the post-pandemic economic recovery takes hold.
“We’re still skeptical that this signals the start of a sustained pickup in inflation, either in the U.S. or elsewhere,” said Ben May director of global macro research for Oxford Economics.
Republicans have intensified warnings that inflation is surging, and they blame the $1.9 trillion stimulus congressional Democrats pushed through Congress. Banks, the congressman who is chairman of the Republican Study Committee, is proposing long-shot changes to House rules to mandate that committees report how proposed legislation will affect inflation.