Republicans politicize inflation while Dem work to fix it. Let's tackle this together
Like so much else in Washington, inflation has become a political football. That's unnecessary.
Inflation, like infrastructure, should be a bipartisan issue. Building on the momentum of the Bipartisan Infrastructure Deal, Democrats and Republicans could tackle inflation next. But that requires Republicans to shake off their habit of scoring political points off economic issues—as we’ve witnessed with their game of chicken with the debt-ceiling—and instead address policy.
First and foremost, that means working together to shift consumer spending towards services and away from goods. COVID concerns and hiring shortages have pushed people away from buying experiences, like dining or travel. Instead, they are buying more things. This surge in demand for goods has snarled supply chains.
This holiday season, elected and civic leaders from both parties should share the same message: help local service businesses by gifting experiences and by supporting vaccination drives. High-contact industries like restaurants need more of their patrons to feel safe indoors this winter. Republicans can’t wring their hands about inflation while continuing to support anti-vaxxers. The best way to fully and permanently reopen the economy is to vaccinate more people.
Businesses also need help hiring. This has been a strong recovery for job creation, but too few of those jobs are filled. This exacerbates inflation by constraining supply. Harvard Business School estimates there are up to 27 million hidden workers in America.
On the House Financial Services Committee, we have been investigating some job market flaws that trip up those disproportionately out of the labor force. This includes parents who took time off, the formerly incarcerated, and people without a college degree.
With good faith engagement, there are bipartisan solutions, from spotlighting unfair resume screening algorithms by big corporations to cutting red tape in occupational licensing.
These improvements in the real economy must be reinforced by tighter monetary policy. President Joe Biden just re-nominated Jerome Powell, a Republican, as chairman of the Federal Reserve. In doing so, he bucked progressive pressure to choose a more dovish alternative and sent a message that he expects a more hawkish Fed. Republicans should reciprocate by helping to hold the chairman to account for the gap between inflation expectations and the inflation target.
Traders on the floor of the New York Stock Exchange look on as a screen shows Federal Reserve Chairman Jerome Powell's news conference after the Federal Reserve interest rates announcement on July 31, 2019. (REUTERS/Brendan McDermid/File Photo)
The Economist expects four percent inflation in 2022; the Fed targets two percent. The chairman must stop the easy money for Wall Street and establish the Fed's credibility on price stability. Pressure from both parties will make that more likely.
Energy inflation policy, too, would benefit from bipartisan focus. Gas prices and home heating bills are surging. Republicans are inaccurately blaming the transition to clean energy. The reality is that global demand is increasing as economies rebound, while supply has been suppressed by Gulf Coast damage from Hurricane Ida and power plays by Russia and OPEC.
The outlook for 2022 is brighter. Instead of fear mongering about climate action, Republicans should offer their ideas on how to buttress the president’s tough measures against oil exporters that abuse their power; on electrifying the economy, so there's less concentration in energy suppliers' market power; and on promoting a thriving clean energy industry here at home.
A major element in American energy policy is infrastructure. The Bipartisan Infrastructure Deal invests tens of billions of dollars into clean energy production and transmission. Our grid will be more resilient and efficient, lowering prices for everyone. The infrastructure bill will also upgrade our ports and improve our transportation system.
All these efforts lower the cost of supplying goods and services, which reduces inflation. And, even economists critical of the administration do not expect the sequel to the infrastructure bill, the Build Back Better Act, to be inflationary, either.
Republicans, then, should stop using inflation as a wedge issue. They need not agree with Democrats on every policy item to make countering inflation a bipartisan exercise. They do, however, need to come to the table with more than just talking points for the midterms.
The GOP must demonstrate it can engage on policy, instead of with a cult of personality.
Source:
Jake Auchincloss