Voters had a lot on their minds as they cast their ballots in this month’s midterm elections, but inflation topped the list. In exit polls, nearly 1 out of 3 respondents said the issue that most influenced their vote for Congress was the relentless rise in consumer prices, which are up more than 13 percent since January 2021. With inflation running at a 40-year high, Democrats were lucky to lose only their majority in the House. They may fare considerably worse if inflation is still raging in 2024. As the fates of Gerald Ford and Jimmy Carter suggest, if Democrats cannot get inflation under control, they are apt to lose the White House.
But Republicans also have a vested interest in bringing prices back to earth. For the better part of two years, the GOP has criticized Democrats for their failure to tame inflation. In their election manifesto, “Commitment to America,” Republicans vowed to “fight inflation and lower the cost of living.” They have just two years to make good on that pledge. If inflation hasn’t been broken by the next time voters head to the polls, Republicans will have lost their most potent issue.
For both parties, then, bold moves to combat inflation ought to be a top priority. Given the hyperpolarized political climate, the odds that a divided Congress will work together to fix the economy — or anything else — are slim. But Congress can act if it chooses to. Here are three steps lawmakers can take if they are serious about inflation.
End the spending spree. In the past three years, Washington has gone on a staggeringly irresponsible bender. In March 2020, President Donald Trump signed a stimulus bill that pumped $2.2 trillion into the economy. That was followed in December 2020 by another $900 billion measure. Four months later came the $1.9 trillion American Rescue Plan signed by President Biden. Respected economists like former Treasury Secretary Larry Summers repeatedly warned that the injection of so much money into the economy would have severe inflationary consequences. They were correct. On Biden’s watch so far, according to the nonpartisan Committee for a Responsible Federal Budget, $4.8 trillion has been added to the 10-year deficit, on top of the $7.5 trillion in deficits added under Trump. Congress should move at once to dam this flood of spending and to cancel the hundreds of billions of dollars in relief funds that have not been used.
Cut tariffs across the board. Under both Trump and Biden, Washington has boosted tariffs on a wide variety of imports from numerous countries. In the name of “protecting” American industry from “unfair” (read: tough) competition, US consumers and businesses have been forced to overpay for everything from Canadian lumber and Chinese solar panels to South Korean washing machines and Brazilian steel. Protectionist tariffs are unwise at any time, but even more so now, when inflation is ravaging Americans’ financial prospects. According to the Peterson Institute for International Economics, trimming tariffs by as little as 2 percentage points on all imports entering the United States could cut the inflation rate by about one-sixth and would save every American household an average of $800 each year.
Kill the Jones Act. This is perhaps the easiest of all fixes Congress could make. There is support among both conservatives and liberals for scrapping the Merchant Marine Act of 1920, a.k.a. the Jones Act. Under the law, any vessel moving goods between domestic US ports — which includes far-flung destinations like Alaska, Hawaii, Puerto Rico, and Guam — must be American built, American owned, and American crewed. The Jones Act is rank corporate welfare. Its chief impact is to jack up the cost of shipping anything by water or to divert cargo to trucks, which is less cost effective (and worse for the environment). Repealing the Jones Act, a long-overdue reform, is all the more urgent at a time when prices are rising by 8 percent a year.
That isn’t all Congress can do. It can halt impediments that have made it harder to extract and refine more petroleum. With the price of gasoline and heating oil up, maximizing the production of domestic energy should be a no-brainer. Congress could also end the moratorium on student loan repayments. A temporary respite in the early months of the pandemic was reasonable. A respite that has lasted almost three years, costing taxpayers $275 billion so far and adding to inflation, is not.
If Congress chooses to act, its hands are not tied. If Republicans and Democrats are prepared to engage in serious bipartisan statesmanship rather than merely pandering to their bases, they could wage an effective war against inflation. But those are big ifs. And recent history isn’t encouraging.