When inflation started to rise last summer, Democratic politicians insisted – with the support of some economists – that it was a temporary phenomenon caused by the pandemic that would have no effect. sustainable on the economy. Six months later, as we Mainers dig deep into a dark and freezing winter, it’s clear that that belief – if they ever really held it – was totally misplaced optimism.
For Mainers, this recently resulted in a significant rate hike imposed by Central Maine Power at the start of the new year. Even under their monthly budget plan, which allows you to pay a fixed amount per month rather than just what you used that month, the bill went up almost 25%. In the case of this particular cost increase, it was caused by a variety of factors rather than the recent rise in inflation, but it is just one more growing expense for all of us as the New Year begin. It’s not the only one, of course, but like gasoline, oil and food, it’s part of the necessities. The question is: what can the different levels of government do to combat rising prices?
At the federal level, the immediate answer seems to be nothing. Right now, the Biden administration and Democrats in Congress seem more interested in spending more money than doing anything to fight inflation. They are stuck in a difficult position right now, as they are simultaneously trying to convince the general public that the economy is doing just fine while arguing that they need to spend more money to help the economy. It’s a tough sell, and not just to congressional Republicans or the general public, but also to some elected Democrats. Thus, it appears that no immediate economic solution will come from Congress anytime soon – indeed, the administration itself is walking away from this issue.
This means that, rather than legislatively addressing inflationary pressure, the job will fall to the Federal Reserve. Historically, fighting inflation has been one of the main jobs of the Federal Reserve, and it does 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 of less than a quarter of a percentage point. If inflation continues to rise, the Fed could take aggressive action to raise interest rates.
The problem with this approach is that it will immediately affect higher interest and variable rate loans, such as credit card debt and student loans, but it will not immediately reduce the costs of goods and services. which have been pushed up by inflation. This means that some consumers will face higher borrowing costs while facing higher costs for day-to-day expenses, and this is where elected policymakers may be able to find common ground. for once. It would be nice to think that in light of these changing economic circumstances, the Democrats in Washington, D.C., would rethink their strategy of pursuing a grand welfare program and refocus their priority on helping those who may be directly affected by this next economic crisis. . Unfortunately, that doesn’t seem to be happening: Rather than trying to solve economic problems, Democrats are focusing on their election laws. While that might seem reasonable, since at least Joe Manchin supports this bill, it still hasn’t attracted bipartisan support, so it’s just as unlikely to pass as Build Back Better was.
With both economic issues and election issues, Democrats might have a chance to do something if they abandon the kitchen sink approach and reduce their focus. Some limited aspects of Biden’s Build Back Better Act have bipartisan support; it’s just that Republicans are united against the bill as a whole.
An expansion of the child tax credit, for example, has attracted interest from both parties: Senator Mitt Romney of Utah has introduced a bill to achieve this on his own. If President Biden really wanted to do something about this issue, he could probably get bipartisan support.
While Republicans may oppose Democrats’ general election bill, a bipartisan group of senators – including Maine’s Susan Collins – are discussing reform the law on the electoral count. Likewise, there’s every reason to think that modest legislation aimed at mitigating the twin effects of inflation and rising interest rates could win bipartisan support, but Democrats should pivot quickly to do so at the during an election year – and there is no indication of such a decision. on the horizon.
Jim Fossel, a conservative Gardiner activist, worked for Senator Susan Collins. He can be contacted at:
Maine Voices: Martin Luther King gave me the courage to shape my own future