When inflation first started rising last summer, Democratic politicians insisted – with the support of some economists – that this was a temporary phenomenon caused by the pandemic that would have no lasting effect on the economy. Six months later, as we Mainers dig deep into a dark, frigid winter, it’s clear that belief – if they ever truly held it – was wildly misplaced optimism.
For Mainers, that was recently reflected in a major rate hike imposed by Central Maine Power as the new year began. Even under their monthly budget plan, which allows you to pay a set amount per month rather than just what you used that month, the bill increased by almost 25 percent. In the case of this particular cost increase, it was caused by a variety of factors rather than just the recent rise in inflation, but it’s just one more rising expense for all of us as the new year begins. That’s not the only one, of course, but like gasoline, heating oil and food, it’s one of the necessities. The question is, what can the various levels of government do to combat rising prices?
At the federal level, the immediate answer appears to be nothing. Right now, the Biden administration and Democrats in Congress seem more interested in spending more money than in doing anything to fight inflation. They’re stuck in a difficult position right now, as they’re trying to simultaneously convince the general public that the economy is doing just great while also arguing that they need to spend more money to help the economy. That’s a tough sell, and not just to congressional Republicans or the public at large, but even to some elected Democrats as well. So, it appears that no immediate economic fixes will be coming from Congress any time soon – indeed, the administration itself is pivoting away from that issue.
That means that, rather than legislatively addressing inflationary pressure, the job will fall to the Federal Reserve. Historically, combating inflation has been one of the Federal Reserve’s primary jobs, and they do so by setting the prime interest rate. The last time the Fed raised rates was more than three years ago, in December 2018, and it was a modest change, by less than a quarter of a percentage point. If inflation keeps rising, the Fed could move aggressively to raise interest rates.
The problem with this approach is that it will immediately affect higher-interest loans and those with variable rates, like credit card debt and student loans, but it won’t immediately lower costs of goods and services that have been driven higher by inflation. That means there will be consumers who face higher costs for borrowing while also still facing higher costs for their everyday expenses, and this is where elected policymakers may be able to find some common ground for once. It would be nice to think that, in light of these shifting economic circumstances, Democrats in Washington, D.C., would rethink their strategy of pursuing a grandiose social welfare agenda and refocus their priority on aiding those who may be directly affected by this forthcoming economic crunch. Unfortunately, that doesn’t appear to be happening: Rather than trying to solve economic issues, Democrats are switching focus to their election legislation. While that might seem reasonable, since at least Joe Manchin supports this bill, it still hasn’t attracted any bipartisan support, so it’s just as unlikely to pass as Build Back Better was.
With both economic issues and elections issues, Democrats might have a chance to get something done if they abandon the kitchen-sink approach and narrow their focus. Some limited aspects of Biden’s Build Back Better Act have bipartisan support; it’s just that Republicans are united in opposition to the bill as a whole.
An expansion of the child tax credit, for instance, has drawn interest from both parties: Sen. Mitt Romney of Utah has introduced a bill to accomplish this on its own. If President Biden really wanted to get something done on that issue, he probably could get bipartisan support.
While Republicans might oppose Democrats’ broad elections bill, a bipartisan group of senators – including Maine’s Susan Collins – is discussing reforming the Electoral Count Act. Similarly, there’s every reason to think that modest legislation to mitigate the dual effects of inflation and rising interest rates could get bipartisan support, but Democrats would have to pivot quickly to get it done in an election year – and there’s no indication of any such move on the horizon.
Jim Fossel, a conservative activist from Gardiner, worked for Sen. Susan Collins. He can be contacted at:
jwfossel@gmail.com
Twitter: @jimfossel
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