Americans are pissed about inflation and who can blame them?
It’s good news for Republicans, in a way, because voters tend to vent their economic anxieties at the polls. So no one will be surprised if they retake Congress in November, especially after all their recent gerrymandering and voter suppression efforts.
To control inflation though they would have to do a lot of non-Republican stuff like, say, break up the companies that control a lot of these markets due to lack of competition: think oil, meat processing and telecommunication services (like Comcast). In previous (mostly Republican) administrations, they passed over most anti-trust laws that would have prevented this.
In reality there’s not much else that can be done. Oh, they’ll want to open more federal lands to oil leasing, but oil companies will sit on their hands. Why should they drill for more oil when it’s chancy and they can enjoy record profits by simply constricting supply?
But also, there’s little anything any government can do to fix the problem because it’s not a national problem; it’s an international one. If you keep up on the news, you’ll discover people everywhere are experiencing the same thing; in fact it tends to be worse elsewhere else. In many third world countries, inflation means cutting meals or starving: they can’t afford the price of regular commodities. Everyone affected wants some sort of magic cure or, failing that, to shift the costs on someone else. Inflation and the pandemic have been causing a lot of global civil unrest. Global climate change is contributing to the problem as it interferes with growing patterns.
President Nixon tried wage and price controls, which artificially kept inflation in check for a while, then quickly zoomed up when controls were lifted. What most people want though is to have their cake and eat it too: check inflation and have the benefits of a fast growing economy. Supply bottlenecks, particularly from overseas where we get most of our goods, affects everyone. We can’t control that the Chinese government decided to shut down Shanghai for two months to control the pandemic. So prices go up and those who can’t afford the higher prices do without. Sometimes this amounts to malnutrition and starvation.
That’s basically the Federal Reserve’s approach to controlling inflation. Their main tool is to control interest rates and lately they’ve been going up. Applied long enough this should reduce inflation, but it’s a little like breaking legs of random people on the street in an attempt to control the problem of too many pedestrians. The Fed tries to do it as painlessly as possible, but it’s not a painless process. Pain is the whole point. If there is no pain, no easing of demand, then inflation continues to soar.
It’s just that a lot of things you really can’t do without. Like housing, for example. Except, yes, you can do without housing; you can join the growing ranks of the unhoused. By adding incredible amounts of stress to a lot of people’s lives, basically by impoverishing them, you cut demand and control inflation. You also dash a lot of other dreams, or at least defer them, such as buying a home.
President Biden is, of course, doing what he can. But it’s all at the edges because in reality there’s not much a president can do. It amounts to a lot of wishful thinking and hope. Open up some more oil leases and maybe oil companies will start drilling. But even if they do, bringing this new oil on the market will take years. Lately, he ended temporarily tariffs on solar panels. This will make it cheaper to set up solar systems and if more people move toward electric cars, maybe cut demand for gasoline too. But don’t expect it to do much before the midterms.
Changing policy in a meaningful way requires changing the law. It requires Congress to find consensus and to work in the national interest. There’s little of that going on now and you can expect less of it after November as our political polarization deepens some more. Which means that government will only become more ineffectual, making it easier for authoritarians to make their case. After all, as Trump told us, only he can fix it. Only of course he didn’t because the President of the United States is not God.
So any solution to inflation is likely long term at best. Real solutions require close international cooperation and tackling systemic issues like climate change. One thing I can say for certain though is that putting Republicans in charge of Congress next year won’t do a damned thing to make it better.