On November 10th it was announced that the consumer price index has increased 6.2 percent in twelve months, the largest yearly increase in thirty years. This announcement coincided with a Washington Post/ABC poll (https://www.washingtonpost.com/politics/2021/11/14/post-abc-poll-biden/)l showing that President Biden’s approval ratings have fallen again: “Despite a mix of economic signals — falling unemployment and rising prices — 70 percent rate the economy negatively, including 38 percent who say it is in ‘poor’ condition.” What should we make of this?
First of all, prices have risen. Inflation is real.
It’s important to understand why this is happening. Despite what Republicans may claim, inflation is not the fault of the Biden Administration. As explained by CNN reporter Allison Morrow (https://www.cnn.com/2021/11/13/economy/what-is-inflation-explainer/index.html): “Blame the pandemic. In the spring of 2020, as Covid-19 spread, it was like pulling the plug on the global economy. Factories around the world shut down; people stopped going out to restaurants; airlines grounded flights… It was the sharpest economic contraction on record. By early summer, however, demand for consumer goods started to pick back up. Rapidly. Congress and President Joe Biden passed a historic $1.9 trillion stimulus bill in March that made Americans suddenly flush with cash and unemployment assistance. People started shopping again. Demand went from zero to 100, but supply couldn’t bounce back so easily.” [Emphasis added] “Blame the pandemic.” Blame the Trump Administration that mishandled the pandemic.
In today’s polarized environment, Democrats and Republicans view inflation differently. Nonetheless, the Washington Post/ABC poll (https://www.washingtonpost.com/politics/2021/11/14/post-abc-poll-biden/) found that most respondents (50 percent) do not hold Biden responsible for inflation. ([Notably] the poll finds majority support for [Biden’s] biggest plans. The Post-ABC poll finds that 63 percent of Americans support Washington spending $1 trillion ‘on roads, bridges and other infrastructure,’ while 58 percent support spending roughly $2 trillion to ‘address climate change and to create or expand preschool, health care and other social programs.'”
Most Republican voters don’t understand economics, so it’s easy for them to believe that President Biden caused the inflation to happen. Recently Florida Republican Senator Marco Rubio said: “This will be a winter of high gas prices, shortages and inflation because far left lunatics control our government.”
The economy is complicated and multiple factors have contributed to the rise in the consumer price index. As mentioned, demand bounced back and supply did not respond rapidly. In addition, there have been problems in the global supply chain. Some are remote — problems in Chinese chip factories — and some are local — a lot of truck drivers quit their jobs, during the pandemic, and have not returned.
Economist Robert Reich (https://www.theguardian.com/commentisfree/2021/nov/11/us-inflation-market-power-america-antitrust-robert-reich ) believes that corporate greed has played an important role in the inflation kerfuffle: “There’s a deeper structural reason for inflation, one that appears to be growing worse: the economic concentration of the American economy in the hands of a relative few corporate giants with the power to raise prices. If markets were competitive, companies would keep their prices down in order to prevent competitors from grabbing away customers. But they’re raising prices even as they rake in record profits.”
Regardless of one’s political persuasion, inflation is likely to diminish in 2022. Writing in CNN Business, Moody’s economist Mark Zandi observed (https://www.cnn.com/2021/11/17/perspectives/inflation-high-prices-economy/index.html?): “As [the pandemic] fades and workers get healthy and return to work, the acute labor shortages and outsize pay increases will end, which means higher prices will too. What’s more, workers who permanently lost jobs during the pandemic will find a new employer; parents who’ve been home tending to children in school online will return to work as schools continue to return to in-person learning; and parents with younger children will take jobs as children eventually get vaccinated and daycare becomes more widely available.” Zandi continued: “All of this refutes the notion that the government spending and tax breaks to support the economy through the pandemic, including the American Rescue Plan this past March, are somehow behind the higher inflation.”
Yes. Inflation is real. It’s been stoked by the pandemic. As we overcome the pandemic, we will overcome inflation.
That, of course, is the challenge. If the pandemic endures, then inflation will endure. President Biden is determined to end the pandemic by mandating vaccination wherever possible, but many Republicans are fighting this. That’s a problem. That’s what we should worry about: Republicans have abandoned common sense.