Hopes that inflation is temporary and peaked months ago may now be assuaged with the May inflation report showing prices up 8.6 percent year-on-year. Instead, we now see that Treasury Secretary Janet Yellen has also acknowledged that high inflation is likely to persist for some time. This is politically disastrous news for Democrats as economic indicators predict the electoral fate of the party in power. The bitter truth, however, is that the inflation we are now facing is beyond the control of either of our political institutions. This does not mean that we are powerless, but a clear analysis of the issue makes it difficult to see a short-term path.
Politics aside, there is no question that inflation of this magnitude damages a nation’s wealth. It follows long-awaited wage perks that are even more daunting, especially for working-class Americans. That voters are most concerned about inflation above any other issue is a perfectly reasonable response, and makes it even more important that the issue is discussed honestly and not exploited for short-term political gain. Walk.
To that end, Americans should be aware that inflation is currently a global phenomenon, with US interest rates “middle-of-the-road” by comparison. President Joe Biden and the Democrats in Congress do not set policy for India or the eurozone countries, but our inflation rate is the same with all of them. The mere fact should inform us that the massive inflation we are witnessing is not a direct result of our domestic politics.
The reality is that Democratic measures like the previous COVID-19 stimulus plan, which sent $1,400 worth of checks to all Americans in the first half of 2021, have had an almost negligible impact on current inflation rates. Furthermore, this stimulus option risked a much longer and sluggish economic recovery, such as that seen in the wake of the Great Recession. Republican leaders blaming this stimulus for inflation are a classic example of politicians attempting to feed the American public convenient lies about their electoral success.
So if it’s not Joe Biden and the Democrats’ fault for our inflation problems, what’s the reason for pushing them to such dismal heights? For one, despite a return to normal life for most Americans, the devastation of COVID on the supply lines is not over, and normalcy is not expected until at least 2023. To that end, China’s insistence on maintaining a “zero-COVID” policy will continue to result in logistical disruptions that will surely keep the global economy in a precarious position.
The latest and perhaps most pressing driver of high inflation is certainly Russia’s invasion of Ukraine, which has rocked global oil and food markets. By blocking Ukrainian ports, Russia is effectively assuring the world that food prices will continue to rise and hundreds of millions of people in the developing world will starve while those in the developed world are left with uncomfortably high food bills. Given the very real possibility that the war could drag on for years, it’s hard to imagine any domestic policy that could give Americans a short-term respite from the effects of inflation.
It’s worth noting that Republicans other than Sen. Rick Scott (R-Fla.) have no real plan to fight inflation and are now abandoning the idea of raising taxes on the poorest 40 percent of Americans. The GOP simply wants to blame the Democrats for their own political gains on a complex issue. They’re not really interested in fixing the problem.
Nicholas Krell is an assistant professor of business law at Georgia College and State University.
The views expressed in this article are those of the author.
What Americans Need to Know About Inflation Policy This article was first published on Newsweek.