Americans are paying more for gas, hotels and cars – will Biden pay the price of inflation?

·6 min read
<span>Photograph: Andrew Caballero-Reynolds/AFP/Getty Images</span>
Photograph: Andrew Caballero-Reynolds/AFP/Getty Images

Joe Biden and his fellow Democrats have been eager to celebrate America’s economic rebound as pandemic-related restrictions are relaxed and more businesses reopen. But there has been one sore spot in recent economic reports that Democrats have been less enthusiastic about: inflation.

Related: Republican governor says ‘time to start blaming unvaccinated’ for rise in cases

As Americans start to resume their pre-pandemic routines, they are noticing they are paying more for certain common goods, such as gasoline and used cars. In June, consumer prices rose by 0.9% from a month earlier, capping the highest 12-month inflation increase since August 2008.

Republicans have pointed to rising inflation as a clear sign that Biden’s large spending packages are hurting American families, while Democrats have insisted the price increases are merely a temporary result of the economy reopening.

Now, as Americans wait to see how prices will change over the coming months, politicians are gearing up for a battle over inflation that could bleed into next year’s midterm elections with Republicans eager to use it as a weapon to attack Biden and possibly grab back control of Congress.

The president and his advisers have mostly tried to downplay rising inflation, noting that most of the price increases are occurring in a small handful of sectors.

“Our experts believe and the data shows that most of the price increases we’ve seen were expected and expected to be temporary,” Biden said on Monday. “The reality is, you can’t flip the global economic light back on and not expect this to happen.”

Biden’s treasury secretary, Janet Yellen, has echoed that view, predicting that inflation will return to normal levels “over the medium term”.

“We will have several more months of rapid inflation, so I’m not saying that this is a one-month phenomenon,” Yellen told CNBC last week. “Of course, we have to keep a careful eye on it.”

But Republicans have blamed rising inflation at least partly on the $2tn coronavirus relief package that Biden signed into law in March. They say that bill, called the American Rescue Plan, has effectively created a tax hike on working Americans by causing price rises.

“Inflation is running rampant due in part to out-of-control spending from President Biden and Speaker Pelosi,” the House minority leader, Kevin McCarthy, said on Twitter last week. “Make no mistake[,] with inflation rising at the fastest pace in 13 years, your hard-earned money is worth less in Joe Biden’s America.”

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Michael Steel, a former senior adviser to Jeb Bush and former House speaker John Boehner, said that inflation-related arguments could resonate with midterm voters if consumers are still feeling sticker shock next year.

“I think the Biden administration is deliberately downplaying or underestimating the risks of high, sustained inflation due to their desire to increase government spending massively,” Steel said.

“I think people have an intrinsic understanding of the fact that spending money you don’t have worsens inflation. And while it’s been four decades since inflation was a politically potent issue, it can become one again very quickly.”

So far, Democrats have responded to attacks over inflation in a couple of different ways. One argument they make is that average families are still better off because of the American Rescue Plan, due to the amount of money they received from the relief package.

“Thanks to House Democrats passing the American Rescue Plan, we are crushing Covid-19, kickstarting the economy and providing game-changing relief to working families with the child tax credit,” said Chris Taylor, a spokesperson for the Democratic Congressional Campaign Committee.

“Every single Republican in Congress voted against this relief. Now, they’re desperately searching for something to say after abandoning the American people.”

Some liberal economists have also suggested that most Americans are not feeling too much of a sting from rising inflation because it is limited to certain items, particularly in pandemic-affected industries like air travel and hotels.

“Where inflation is happening right now, people to a very large degree can actually avoid it,” said Christian Weller, a senior fellow at the liberal Center for American Progress. “Most people don’t have to buy a used car, and most people don’t have to fly.”

But Weller acknowledged that many Americans are eager to travel after enduring a year of pandemic-related restrictions.

“I understand people are impatient,” Weller said. “They want to see prices come down sooner, but it’s going to take a little bit of a while.”

If the current price increases linger, it could put Democrats at a political disadvantage as they try to pass Biden’s infrastructure proposals, which would require trillions more in government spending.

Republicans have pointed to rising inflation to justify opposing the $3.5tn bill that Democrats are crafting to expand Medicare, invest in the care economy and fund climate-related initiatives, among other things.

“It would be hard to imagine a proposal less suited to the conditions our country is facing,” the Senate minority leader, Mitch McConnell, said last week. “Americans cannot afford another socialist borrowing, taxing, and spending spree that will kill jobs and raise costs for working families.”

Jason Furman, who previously served as the chair of the Council of Economic Advisers during Barack Obama’s presidency, said that such arguments do not hold water because of how the infrastructure proposals are structured.

While the American Rescue Plan resulted in an immediate injection of cash into the US economy through relief payments, the money from the infrastructure bills would be distributed over the course of several years. Therefore, the infrastructure proposals, if enacted, are much less likely to have a significant impact on inflation.

“I think the inflation debate about the current legislation is a complete red herring, but I don’t think it’s totally false on the last one,” Furman said.

The former CEA chair was somewhat skeptical of Democrats’ attempts to downplay rising inflation as the short-term result of supply-chain bottlenecks in certain sectors affected by the pandemic.

“I think it’s also people spending more, and they’re spending more because they got more,” Furman said, referring to the relief payments from the American Rescue Plan.

He added, “I think a lot of what we’re seeing is transitory, but I think there’s a core of it that’s potentially more permanent. And then the question is, do wages adjust to offset it?”

The answer to that question could determine who controls Congress after the midterms next year.