Since pundits seem to have collectively decided the election is about one word — “inflation” — it’s time to take a closer look.
Democrats are charged with not having a plan to “fight inflation,” and it’s true; they do not.
Republicans, who expect to win because of “inflation,” do not have a plan, either — though they are pledged to policies that will make inflation worse.
Specifically, Speaker-in-waiting Kevin McCarthy wants to immediately repeal the 15% corporate minimum tax, dramatically increasing the budget deficit; under Biden administration policies, the deficit has been cut in half over the previous year.
Higher deficits, by definition, produce inflationary pressures in a high-performing economy, which we still have, for now.
So, one party wouldn’t do much about inflation, while the other would make it worse, possibly much worse, as we view the long-term results of tax cuts by every Republican administration, except one, over the past 40 years: Reagan, George W. Bush, and Trump. The George H.W. Bush administration actually raised taxes, earning excommunication among GOP ideologues.
So, one can see, as often happens in politics, that we’ve misstated the problem. What Congress does, or does not do, next year, probably won’t have much impact on inflation.
For better or worse, we turned over control of the money supply to the Federal Reserve System more than a century ago, in 1913. Removing elected officials from the picture followed a turbulent period in which the U.S. had no central bank, and Congress fought endlessly over “sound money” vs. “free coinage of silver.”
The original Bank of the United States had been a private venture, abolished by Andrew Jackson in 1832. As the modern economy began to burgeon after the Civil War, the non-system produced severe “panics” in 1873 and 1893 that created widespread hardship.
The original Progressives came up with the solution, since emulated around the world — a publicly controlled, independent central bank. Elected officials can’t super-charge the currency to win re-election — as Donald Trump urged the Fed to do — but the officials who do exert control have weighty responsibilities, without being directly accountable to voters.
The Federal Reserve flunked its first big test following the onset of the Great Depression in 1929. Based on the laissez faire ideology of the day, it refused to intervene, and the economy contracted for an agonizingly long time, producing, in Franklin Roosevelt’s memorable words, “one-third of a nation ill-housed, ill-clad, ill-nourished.”
After the eventual recovery, and the enormous post-World War II expansion, the Federal Reserve was given two tasks: to keep inflation in check, and to provide full employment. It isn’t easy to balance these goals, but we must keep both in mind.
Despite high inflation, the economy is humming along. For the first time in two generations, young workers are earning significantly higher wages which, if sustained, could revive the middle class, allowing workers to comfortably raise their kids and afford decent housing.
Also not to missed: the lowest poverty rate on record. Prosperity really is being shared.
Those on Social Security, meanwhile, are protected against inflation by seeing their checks rise accordingly. Inflation, while a serious issue, represents only one side of the economic story, and hardly the only issue before voters.
We must be patient, recognizing the paradox of national fiscal policy (Congress) and monetary policy (the Fed).
Major tax and spending shifts have immediate impact but are usually debated in Congress for months or years first.
Changes in the money supply can be enacted literally overnight — but take a year, sometimes longer, to be fully absorbed into the economy. The Fed has boosted interest rates faster than at any time in history, producing 7% mortgages, yet we won’t know the outcome until deep into 2023.
No one knows, frankly, whether the Fed can make the “soft landing” it’s achieved before, or if the economy will fall into a punishing recession.
Successful or not, basing our votes on current inflation numbers makes no sense. Rather than yesterday’s polling, we might focus on what really matters to us — and where Congress can have a major impact.
For Democrats, that probably means abortion rights, the climate crisis, and social and economic justice.
For Republicans, it would be immigration levels, federal spending and — maybe — what’s being taught in school.
Independents have to decide which agenda is more compelling, and who to trust with the vast powers of government.
All of us have the responsibility to weigh the parties’ commitment to democracy. Does the candidate respect the result of elections, and believe in holding all officials, without exception, legally accountable?
Without iron-clad pledges on both, it’s hard to see how they can earn our votes.
Douglas Rooks, a Maine editor, commentator and reporter since 1984, is the author of three books, and is now researching the life and career of a U.S. Chief Justice. He welcomes comment at drooks@tds.net
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