Inflation distresses Americans for very good reasons. It depletes their wallets, creates anxiety about the future and endangers the national economy.
The political conversation about inflation, however, is not very good. In fact, it’s largely a charade, with enough artifice to go around among all the actors involved.
Republicans, as would be expected, play the role of prosecutor indicting a Democratic defendant. They charge President Joe Biden with causing a singular plague of price hikes that are “crushing” American consumers. They mock him for having assured the country, when the problem flared last spring, that inflation would be “transitory.”
Those dramatic allegations have placed the GOP in a strong position for midterm election gains this fall. But on the merits, they omit lots of contradictory evidence.
Inflation has surged in countries around the world as pandemic-hobbled economies lurched back into stride. That process strained manufacturers’ supply muscles, all the more so since the pandemic created new patterns of consumer demand that businesses weren’t prepared to meet.
The resulting inflation has indisputably produced economic pain for millions of families, eroding the buying power of higher paychecks. At the same time, they have not been “crushed” badly enough to prevent them from spending at a steady pace.
That’s because families up and down the income scale, thanks to Covid relief checks, generally still have more money than before the pandemic; in the lingo of economic analysts, “household balance sheets” still have “excess savings.” Unemployment has fallen back below 4%.
“The excess saving has been enough to cushion the impact of declining real wages on spending, even for lower-income households,” says Moody’s chief economist, Mark Zandi. “American households are for the most part in a good financial place.”
The Biden White House was hardly alone last year in believing inflation would be short-lived. So did the Federal Reserve, the government agency responsible for monitoring and controlling inflation through stewardship of monetary policy.
The media’s role is always to hold government accountable. But the unelected, comparatively obscure Fed doesn’t hold daily press briefings.
The White House, home to the most visible public official of all, does. So reporters continually question the President about solutions to rising prices, even though, in a free-market economy, no White House has much power to bring them down.
The President’s role is to answer the questions. For unhappy voters, “not much I can do” doesn’t cut it.
So Biden often resorts to political performance art. He joins fellow Democrats in assailing greedy corporations, even though corporat