Inflation politics is clearer than inflation economics

Since inflation has reared its ugly head, economists have been arguing about whether it is a transient problem or a structural one, with some economists going so far as to distinguish between “good” inflation and “bad” inflation. But political scientists think of inflation because it affects the American voter and in this respect the problem is more obvious. Even if economists who believe inflation will fall this year are right, the impact on working-class voters could be disastrous for Democrats in the midterm elections.

With inflation still rising, the Biden administration cannot ignore what people go through in their daily lives. Huge numbers of Americans point to inflation as a major concern. However, with higher prices in the more visible parts of the economy – food, gas, and electricity for example – the effect was different for low- and high-income Americans. A recent AP-NORC survey found that “half of people in households earning less than $50,000 a year say higher prices have had a significant impact on their finances. Only a third of those in households earning more than $50,000 say the same.”

A Gallup poll found similar results. Seventy-one percent of households with an income of less than $40,000 reported that inflation caused them severe (28 percent) or moderate (42 percent) suffering. While only 29% of households earning more than $100,000 reported severe (2%) or moderate (26%) suffering. Finally, 71% of people earning more than $100,000 reported that price hikes were caused by it number hardship.

I think it’s this way. Some people go through the grocery store to add items while putting things into their cart to make sure they have enough money to pay the bill when they get to the checkout counter. Others simply put the items they want into their cart without worrying about the total. These are two very different groups. For the former, inflation is a daily concern, especially in two places most Americans can’t avoid—the gas station and the grocery store. For high-income Americans, inflation is a cause for concern, but its impact is less serious.

The relationship between income and education is clear: college graduates earn more than high school graduates (because poll data on voter income in 2020 is incomplete, but educational attainment is not, we use education as a proxy). Not surprisingly, among people without a college education, 13% reported severe hardship and 40% said they had moderate difficulty due to inflation. For people with a college degree, the effect is less dramatic; Only 4% reported severe suffering and 26% indicated moderate suffering.

The people who feel the impact of inflation are also those who cast decisive swing votes in the last presidential election, where a wide education gap opened up between the two parties. Among voters with a bachelor’s degree or more, Biden received 61% of the vote, up from 57% for Hillary Clinton in 2016. This total included 57% of white voters with a college degree or more, 69% of Hispanics, and 92% of Africans. Americans. The gap in Biden’s support between whites with and without college degrees was 24 points; Among Hispanics with and without college degrees, 14 points. By contrast, there was no educational gap at all among black voters. Voters with incomes under $50,000 are a large group. They accounted for 38% of the vote in the 2018 midterm elections and 35% of the vote in 2020.

Biden won the 2020 election in part by improving his vote among working-class white voters in contested states. In Michigan and Wisconsin, for example, white non-college voters made up more than half of the electorate (52% and 56%), dumping black and Hispanic voters in those states. In fact, as the following table shows, white non-college voters outnumber black and Hispanic voters combined in all contested states except for two, Georgia and Texas, where they are equal. Given that not all minority voters, especially Hispanics, vote for Democrats, one can see that to even hope to retain the House and/or Senate, Democrats must cut out white non-college votes — as Biden did in the 2020 election. – While reversing the escape of Hispanics from the working class from the ranks of the Democrats.

Opinion polls for the 2020 presidential election, CNN

These are the Democratic voters need. All too often, Democrats’ enthusiasm for expanding social programs blinds them to the concerns of the large number of families who do not want (and may not benefit) from social programs but live from paycheck to paycheck and worry about paying their bills.

As President Jimmy Carter discovered, inflation, whether temporary or structural, is bad policy, especially when political margins are close. The public will not tolerate a president who appears unaware or indifferent to their most important interests, and inflation at the moment is one of them. According to a recent poll, 54% of Americans see the pace of price increases as the best measure of how the economy is doing, compared to just 19% who see the unemployment rate as a measure of how the economy is doing.

President Biden should be seen as working as hard to curb inflation as enacting key economic legislation. It can’t control the Federal Reserve, whose actions can affect demand for goods and services, but it can have an impact on their supply, especially by undoing the supply chain. Making sure grocery store shelves are full would be a good start.

However, the administration’s political hopes must be modest, at least in the short term. Public beliefs about economic conditions tend to lag far behind changes in these conditions, and it would take a rapid decline in inflation by this spring at the latest to change the negative public judgments of management’s handling of the matter. Besides, the current wave of inflation is unlikely to abate quickly; Economic history suggests otherwise.

Reducing inflation will have a major political impact on the 2024 presidential election, but the administration should be fortunate to achieve that result in time for the 2022 half-year.

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