Republicans are seizing on rising inflation as they attempt to derail President Biden’s economic agenda and take back control of Congress in next year’s midterm elections.
GOP lawmakers have highlighted quickly rising prices, and strategists believe the issue could resonate deeply with a broad range of voters while congressional Democrats push ahead with plans to spend trillions more.
But many economists expect prices to cool off well before voters head to the polls, posing risks for the GOP’s strategy.
For now, though, Americans are reckoning with higher costs for gasoline, food, automobiles and numerous other goods and services after prices plunged during the depths of the coronavirus pandemic.
Consumer prices have risen 5.4 percent in the past 12 months, according to the Labor Department, as the swift reopening of the economy pushes inflation higher.
Republicans have started referring to “Bidenflation” on the campaign trail, and GOP lawmakers are getting theatrical with their attacks.
Sen. Joni Ernst (R-Iowa) gave a speech on the Senate floor last week with a sign that read “The Price is Up” accompanied by a “wheel of inflation,” making an obvious play on the “Price is Right” game show.
On the House campaign side, the National Republican Congressional Committee this month released a batch of Fourth of July ads hitting vulnerable Democrats over the rising cost of "burgers, buns, propane and gas."
For items such as hotel rooms, airfares and gasoline, prices have simply rebounded to their pre-pandemic levels. But other goods — like automobiles, rental cars and a wide range of consumer technology — are more expensive because of supply shocks.
“It's true that [inflation] has risen in recent months, but it would be a mistake to think that it is free of all Covid influence,” wrote Ian Shepherdson, chief economist at Pantheon Economics, in a Thursday research note.
“All we can say for sure about the big picture, then, is that inflation excluding all Covid effects is much lower than the current core rate, and that if it is rising, the rate of increase is slow.”
Treasury Secretary Janet Yellen expressed confidence last week that high inflation, while troubling, would not persist for much longer.
“We will have several more months of rapid inflation, so I’m not saying that this is a one-month phenomenon,” Yellen said in a Thursday interview with CNBC.
“But I think over the medium-term, we’ll see inflation decline back toward normal levels,” she added. “Of course, we have to keep a careful eye on it.”
Rising prices have already shown signs of denting consumer confidence.
The University of Michigan’s widely watched consumer sentiment index fell 5.5 points earlier this month from a June level of 85.5, due largely to rising prices.
“Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households,” said survey chief economist Richard Curtin.
A Fox News poll released late last month found that 83 percent of respondents said they were concerned about inflation.
Republicans say the issue plays well for them because it impacts voters across all spectrums.
“Everyone is pissed off that they’re paying more for gas,” said one GOP operative. “Everyone is pissed off that they’re paying more groceries. Everyone is upset that they can’t find a house to buy because the housing market is through the roof.”
Additionally, Republicans are optimistic that the issue has the power to attract new voters or those who do not usually cast ballots for Republicans.
“I think it’s a great opportunity for Republicans to try to turn some soft Democrats red,” said Dan Eberhart, a GOP donor. “People are going to vote [with] their pocketbook and the economy, and their pocketbook is a lot closer to them than the economy in general.”
“This is a great opportunity to turn an issue that is easily understandable to young voters that are having to pay for bills and this is going to be a great opportunity for Republicans to turn them potentially into Republican voters this cycle,” he continued.
Focusing on inflation fears could also resonate well with older voters, who are more likely to vote in midterm elections and have vivid memories of the country’s last big struggle with inflation.
As inflation hit double digits in the late 1970s, the Federal Reserve raised interest rates and plunged the U.S. into a downturn to stop the price spiral. While the Fed eventually cooled off those price increases, the widespread economic pain was one of several reasons why former President Carter lost his reelection bid in 1980.
Four decades later, Republicans are attempting to paint Biden as the heir to Carter’s economic legacy and ride inflation fears back into power.
“In the '70s, as you will recall, high inflation crippled consumers with rapid and sudden price increases. Many of those conditions exist today, such as loose monetary policy and significant government spending,” said Sen. Richard Shelby (R-Ala.) said during a Senate Banking Committee hearing Thursday with Fed Chairman Jerome Powell.
“If we fail to take inflation seriously, Mr. Chairman, I'm concerned that our nation could be faced with the same challenges of years ago.”
But Powell, a Republican who often recalls his anxiety about entering the job market during the height of 1970s stagflation, insisted that wouldn’t happen. He said the recent surge in prices is primarily driven by short-term factors, not the decades of policy that led to the '70s crisis.
Powell, along with a broad range of economists, has argued that raising interest rates to curb inflation prematurely could derail the recovery from the pandemic with millions of Americans still out of work.
“We're not going to be going into a period of high inflation for a long period of time because, of course, we have tools to address that,” Powell said.
“We’re watching very carefully and ... if we see inflation expectations or the path of inflation moving up in a way that's troubling, then we will react appropriately.”
Democrats have brushed off the threats of long-term inflation. They also tout the Biden administration’s vaccination efforts and the passage of the American Rescue Plan as accomplishments voters will remember when they head to the polls next year.
“I don’t think the Build Back Better agenda is at all inflationary because the money is spread out over time and it's much less per year than the rescue plan and much of it will be paid for,” said Jason Furman, who led the White House Council of Economic Advisers during the Obama administration.
“That gives the economy time to absorb it, that gives the Fed time to make changes and it also expands the productive capacity of the economy.”
The campaign arm of House Democrats in May launched a five-figure ad campaign targeting vulnerable House Republicans who voted against Biden’s $1.9 trillion rescue plan in March.
“Thanks to House Democrats passing the American Rescue Plan, we are crushing COVID-19, kickstarting the economy, and providing game-changing relief to working families with the Child Tax Credit,” said Chris Taylor, spokesperson for the Democratic Congressional Campaign Committee.
“Every single Republican in Congress voted against this relief. Now they’re desperately searching for something to say after abandoning the American people.”
But conservatives are confident that the relief law, and the additional spending Democrats are seeking with their $3.5 trillion budget deal, will only drive up inflation.
“Four decades of low inflation is coming to an end thanks to the reckless spending by Biden and the Democrats in Congress,” said Alfredo Ortiz, president and CEO of the Job Creators Network, a conservative group. “And once the genie of inflation is out of the bottle, it's nearly impossible to put back in.”