INFLATION WILL DRIVE OUR POLICIES IN 2022 – AND POSSIBLY IN 2024. The brief time when some Democrats hoped abortion would be the deciding factor in the halftime races appears to be over. When the Bureau of Labor Statistics recently announced that inflation would remain high and persistent, predictions that the cost of living would fall as a factor in our policies proved wrong.
Poll after poll after poll shows that inflation is voters’ top concern. It drives the midterm elections forward. Yes, abortion and crime and the border are issues. Democrats are hoping former President Donald Trump, who is being relentlessly pursued by the Justice Department, the New York Attorney General, a Georgia prosecutor and others, will also play a role. But inflation is the design factor, the driving factor in the 2022 midterm elections.
Here’s a disturbing thought. It could well be that inflation and the chain of events it triggers will also be the driving factor in the 2024 presidential election. Just look at the hope-destroying press conference given by Federal Reserve Chair Jerome Powell this week as the Fed hiked rates another three-quarter point.
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First, Powell clarified that the Fed intends to raise rates again soon, probably later this year. Further increases, on top of those already made, will make it increasingly expensive to borrow money, whether for a business, home purchase, or consumer purchase. This slows down economic activity. And that means people will lose their jobs. Put that together and you have a recession. And that will eventually lower inflation.
“I wish there was a painless way to do that, but there isn’t,” Powell said Wednesday. “So what we need to do is raise interest rates to the point where we have meaningful downward pressure on inflation, and we are doing that.”
Many observers had hoped for months that the Fed would be able to rein in inflation without triggering a recession – the so-called soft landing scenario. Skeptics pointed out that soft landings were extremely rare. And on Wednesday, Powell pretty much put an end to hopes of a soft landing. “We have always understood that restoring price stability while achieving a relatively modest… unemployment rise and a soft landing would be a major challenge,” he said. “And we don’t know, nobody knows, if this process will lead to a recession, or if it does, how significant that recession would be.” likely to decrease landing”. The message was clear: a soft landing would be nice, but it probably won’t happen.
Here’s the political side of it. The Fed envisions a long fight against inflation. It has raised interest rates by 3 percentage points so far this year. It promises more. This problem will not go away until the end of this year. And if – when – Fed policy does bring about a recession, how long will that last?
The presidential campaign begins right after the midterm elections. There will be a lot of campaigning in the first months of 2023. Candidates will no longer pretend to be promoting midterm candidates and will start promoting themselves. Activity will pick up again in the summer and fall as the caucuses and primary elections, which begin in January 2024, draw closer.
Of course it’s impossible to know what will dominate the campaign. Huge, totally unforeseen events could happen that would dominate our politics for years – a 9/11 or a pandemic or something. But we now know that the economic outlook promises to be rocky not only this campaign season but also as the presidential campaign begins. At least the beginning of the 2024 campaign will be about inflation, as was the 2022 campaign.
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