The inflation electorate will hold Biden and Democrats accountable at midterms

If you are under 60, you had never experienced this in your life. 

It’s inflation.

It haunted us in the 70s, but we banished it until today. It’s far more pernicious than any tax, hitting lower income folks and seniors in their retirement, robbing them of their purchasing power and destroying their savings. It is visible almost everywhere, at the gas stations and the supermarkets. It is no surprise that the midterm elections and possibly even the next presidential election will turn on this one issue.

In 1980, Ronald Reagan won the presidency by convincing people that America could not stand four more years of President Jimmy Carter’s economic policies, though in fairness the problem started in the Nixon and Ford administrations. It would be solved by a combination of higher interest rates and then pro-growth policies that renewed Americans’ faith in their country and in a future for their kids.

Next week the Federal Reserve will again decide whether they will raise interest rates 0.75 percent or begin to moderate its policies. By the Fed’s own estimates, their policies, if carried out will cost about 1.5 million Americans their jobs. An unelected body of economists will make the decision on whether to cost people jobs or save retirees’ nest eggs. It’s like chemotherapy for the economy – it may work, but at a difficult cost.  

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Most Americans blame Joe Biden and the Democrats for the problems we are facing today. In the October Harvard CAPS-Harris Poll, 55 percent of voters, including 42 percent of Democrats, blamed Biden for inflation. They believe that the "American Rescue Plan" was too much government spending at the moment the economy was recovering from the pandemic and the result was to let the inflation genie out of the bottle again. Whether that is in fact true is something economists will no doubt debate, but former Treasury Secretary Larry Summers accurately predicted the impact of the bill and warned of its effect. 

The electoral impact of this issue is singularly powerful. We define ‘the inflation electorate' as the 25 percent of respondents in September’s Harvard-Harris Poll who say that inflation is their number one concern for the midterms and that their personal financial situation is worsening. Nearly half these voters are Democrats or Independents but the Congressional generic ballot among them favors the Republicans by a lopsided 69 percent to 31 percent. It is in my view that inflation and its impact is the key factor giving Republicans the clear edge in these midterms. 

When asked in recent polling whether voters believed the cure for inflation should be higher taxes or lower government spending, the voters chose a smaller government. Sixty-seven percent of voters said they are more likely to vote for a candidate who supports addressing inflation by reducing federal government spending, according to the NBC News poll. Many may recall the most famous line of Bill Clinton’s 1996 State of the Union: "The era of big government is over." The last few years have been more like the old Jack Nicholson horror movie in which he declares "I’m back!" And so today government is bigger than ever and even record tax receipts cannot cover the trillions of dollars of new spending.

Voters see through the title of the "Inflation Reduction Act." Sixty percent of the inflation electorate believe that the bill will in fact cause more inflation, according to the Harris Poll. On top of that Biden has put through a student debt reduction plan that is estimated to spend somewhere between $400 and $700 billion. When we asked the inflation voters how they felt about this plan, 11 percent of them said that the debt relief will help them personally, and 52 percent said the plan makes them less likely to vote Democratic. 

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It is time for smart politicians, whether they be Democrat or Republican, to go back to the basics of fiscal responsibility as the linchpin of financial security for this and future generations. There is no longer any talk of Modern Monetary Theory that suggested sky-high deficits were sustainable without damaging the economy. Seventy-seven percent of Americans, including majorities of Democrats and Republicans, think the U.S. needs a balanced budget resolution to prevent government debt and the deficit from getting out of hand, according to a July 2022 HarrisX survey. The public seems ti have a clearer idea than the politicians about how to fix things.

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Bidenomics has failed the American people. In the Harris Poll, over 65 percent see the economy as heading in the wrong direction, and 57 percent see their own personal situation as worsening. The midterms will almost certainly bring a Republican House, but that alone will not solve the problem. The midterms will also mark the beginning of the next presidential campaign, and the next president will undoubtedly be the one who has a credible plan for restoring prosperity to America after the mess that has been created. That road likely starts with putting America back on the path to a budget balanced according to our values.

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