For a while, Republicans had some pretty good ammo for attacking the Biden economy. But it’s melting like snowballs in South Florida.
For the last two years, Republicans have been highlighting “Bidenflation,” the “inflation crisis” supposedly caused by the “Democrats’ big spending bills,” as the GOP majority on the House Ways and Means Committee frequently asserts. The Republican National Committee says two years of elevated inflation under Biden have made families poorer. Florida Gov. Ron DeSantis, who’s running for president, highlights inflation as a main reason to eject Democrats from the White House.
Except inflation has been coming down rapidly and could be a nonissue by this time next year, when voters are deciding whether Biden deserves another four years. The annual inflation rate has dropped from a high of 9.1% last June, to just 3%. That’s barely above the Federal Reserve’s target of 2%.
So-called core inflation is higher, at 4.8%, which means inflationary trends persist. That could prompt the Fed to raise interest rates a bit more through the end of the year.
But most economists expect inflation to continue trending downward, which means the Fed is approaching mission accomplished. “The inflation shock is over,” Robin Brooks, chief economist at the Institute for Intl. Finance, wrote on Twitter on July 12. “The US inflation spike was transitory after all.”
Some Biden critics say big spending bills Congress passed in 2021 and 2022, when Democrats controlled both chambers, contributed to the surge in prices that began in the middle of 2021. But COVID-related disruptions in supply chains and spending patterns clearly had a lot to do with it too. So did a global recovery that sent energy prices higher, followed by Russia’s invasion of Ukraine, which added a fear premium to already high energy costs.
Many of those factors are now abating, one big reason inflation is coming down. A burst of spending on goods during the pandemic, when millions were stuck at home, pushed goods inflation as high as 14% in March 2022. It’s been falling ever since, as spending shifts back to services such as travel and dining out. Goods inflation has actually turned negative, with prices falling by nearly 1% year over year.
An increase in the cost of services now accounts for basically all inflation, with services up 6.2% during the last 12 months. But that’s coming down from a peak of 7.3% in February.
Inflation remains highly uneven, and consumers will still notice elevated prices in some areas. The cost of rent, groceries, and restaurant meals is still elevated, even though inflation is easing across the board:
New car prices spiked during the pandemic, but the annual rate of new-vehicle inflation is now down to around 4%:
The most encouraging news is deflation in some categories, including appliances, furniture, and used cars. That means prices are falling, with consumers gaining purchasing power.
Federal Reserve interest rate policy takes 12 to 18 months to work its way into the real economy, and the Fed didn’t start hiking until March of 2022. So monetary tightening via higher interest rates should continue to constrain spending and bring inflation lower. Moody’s Analytics forecasts an inflation rate of just 2.4% in the fourth quarter of 2024, which might be in the Fed’s comfort zone.
If inflation settles down and the highly visible prices of eggs, cereal, rent, gasoline, and cars correct back toward pre-COVID norms, Republicans will get little traction dinging Biden on inflation next year. So what else do they have?
It’s still possible the Fed will overdo it and cause a recession, with rising unemployment. That wouldn’t really be Biden’s fault, but some voters would blame him anyway. Biden will be 81 on Election Day, and his age will undoubtedly be an issue, though less of one if a 78-year-old Donald Trump is his opponent.
There is also immigration and social issues such as “wokeism” that Republicans have in their arsenal. But voters are likely to care less about those things if inflation isn’t scaring them anymore. It may be time for the Biden bashers to find some fresh ammo.