Opinion: Inflation once drove US politics


Editor’s note: Meg Jacobs teaches history at Princeton University. Follow her on Twitter @MegJacobs100. The opinions expressed in this commentary are his own. Lily more reviews on CNN.



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President Joe Biden is accused of playing politics with oil. His opponents say the reason he releases millions of barrels of oil from the strategic petroleum reserve is to lower prices at the pump ahead of the midterm elections. They may be right.

As opinion polls reveal, the economy seems to be the main concern of voters.

As the midterm elections approach, more and more candidates, especially in the GOP, are running on anti-inflationary platforms. It’s not new. This is because the battles over inflation – what is causing it, who is to blame, what should be done – turn into basic battles over who should have what. Should companies make bigger profits, should workers earn higher wages, and should consumers bear the burden of both?

The Federal Reserve reacts to the highest inflation rate in 40 years, and economists debate whether the Fed should keep raising rates or take a break, trying to find the sweet spot and steer the economy to a landing slowly.

But there is a disconnect between debates over politics and political tug-of-wars over high prices. The public and its representatives have a very different discussion. They see this economic phenomenon as a competition to know who deserves what.

The GOP’s political action committee, One Nation, has spent millions in Georgia to unseat Sen. Raphael Warnock, saying it supports “reckless spending,” which it blames for recent inflation. Warnock and other Democrats have argued for the economic bailout needed to help people cope with the pandemic, but as The New York Times has reported, they are wary of trumpeting that spending now that the GOP is letting it go. blame for inflation. This too is nothing new.

In 1952, Dwight D. Eisenhower, the decorated World War II general and GOP presidential candidate, aired the first television political ad. The theme was inflation. Is the high cost of living getting you down? In the ad, he talks to an “average” housewife, who complains that “high prices are driving me crazy,” and Eisenhower promises to fight on her behalf. This was at a time when inflation was less than 2%!

This strategy was a way of blaming organized labor – which in turn was a way of blaming the New Deal. In many places, Eisenhower looked at the camera and said, “Instead of asking which part will lower the prices, why not ask which part raised the prices? And then he broke a piece of wood in half to demonstrate the decline in purchasing power since the end of World War II.

The campaign was largely successful. According to the GOP, organized labor benefited at the expense of middle-class consumers.

And there was something. It was the time when, for the first time, the U.S. Census declared that largely non-union salaried white-collar workers outnumbered blue-collar workers in industry. Both groups prospered, but blue-collar union men and women filled the wage gap with those working in offices. This meant that all kinds of semi-skilled factory workers, of different races and ethnicities, were catching up with their more educated white counterparts. Organized labor was at its peak, and unions even managed to get cost-of-living adjustment clauses built into their contracts, a benefit not enjoyed by those who received an annual salary and were not party to the collective agreements.

The Republicans, now in power, used “creeping inflation” to undermine new workers’ power. “Inflation is the great thief,” warned George Humphrey, Eisenhower’s first Treasury Secretary. “The young, the old, the sick, the small savers, all those least able to protect themselves are helpless prey to wicked inflation.

According to public opinion polls from the 1950s, when annual inflation averaged below 3%, Americans cited inflation as the most important domestic problem in eight out of 10 years.

Democrats tried to blame big business for “administering” higher prices, but that accusation fell on deaf ears. The demonization of work prevailed. As liberal economist John Kenneth Galbraith wrote in 1957, “The public will always attribute the entirety of price increases…to the alleged rapacity of the unions.”

The next big distributive battle over the high cost of living took place in the 1970s. Back then, however, the conversation was different. Republicans didn’t so much use inflation to target organized labor, or only organized labor, as they blamed inflation on government spending on welfare programs that politicians said we couldn’t allow us.

Already in the 1960s, before there was real inflation, the GOP criticized President Lyndon B. Johnson for spending too much on his great society, including his war on poverty and fair housing.

This attack on the Democrats for overspending continued into the 1970s when inflation heated up. At the start of the energy crisis, there was pressure, for example, to reduce bus transport for school integration as a luxury that required more fuel and only increased the price of petrol .

Richard Nixon, then in the Oval Office, imposed price controls on everything from beef to gasoline, fearing the impact on his re-election efforts. And after the Arab embargo in the fall of 1973, he knew that rising prices at the pump were a “gut problem” that could bring him down. Despite his free-market GOP roots, he embraced price controls.

Nixon was under pressure from Democrats who blamed pump prices on Big Oil and dragged top oil executives to congressional televised hearings and accused them of earning “lewd profits.”

These attacks played well in the run-up to the 1974 midterm elections, when the Democrats extended their control. Yes, there was the Watergate scandal. But polls have shown that what people really care about is the high cost of living. A July Gallup poll found that 48% of respondents said the high cost of living was the top issue; only 11% reported corruption in government and Watergate.

A generation of scholars and textbooks barely mention this aspect of the 1974 midterm reviews. Watergate seemed so much more pressing. But even now, as then, it’s not clear that allegations of wrongdoing by a current or former president matter as much as rising prices.

One would think that the 1976 election would have been a clear victory for Jimmy Carter after Nixon resigned and President Gerald Ford pardoned the disgraced president. But that was not the case. It was a close race, with Carter winning with less than 2% of the popular vote, because by then the first oil shock had passed or at least stabilized.

But high prices would eventually define Carter’s presidency. Commentators constantly remind us that the current inflation is the worst since the 1970s. But the 1970s were defined by stagflation, not just inflation, where rising prices were accompanied, surprisingly professional economists, a rise in unemployment. This compounded the impact of inflation.

And that made Carter’s reelection chances in 1980, when inflation was in double digits, rather bleak. Most politicians in his party wanted him to fight unemployment. Finally, he opted for the fight against inflation. And he ushered in what became known as the “Volcker Shock,” appointing Paul Volcker to the Fed. Volcker pushed interest rates even higher than the rate of inflation. Nobody at the time was talking about trying to find a soft landing. Unemployment soared.

Even though interest rate hikes promised to eliminate inflation, the public didn’t care and Carter paid the price, losing in a landslide to Ronald Reagan.

Today, few candidates show up for a debate on what the Fed should or shouldn’t do. Since the Volcker shock, economists have established that raising interest rates is the appropriate policy response.

But Americans continue to fight over who is responsible for inflation. Is it Big Oil, is it Vladimir Putin’s price hike? Or is it Biden and increased government spending for his watch?

Certainly it helps Democrats that gasoline prices, a huge driver of inflation, have come down. Nothing makes people more nervous than rising gas prices. And the recently announced release of the Strategic Petroleum Reserve is an acknowledgment of this reality.

But it’s still unclear how the high cost of living will play out at the polls. The only thing that is clear is that these fights are as much about who deserves what as they are about actual politics.

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