The economy is a major issue heading into the midterm elections, with one NYTimes/Siena poll showing 44% of voters stating inflation and the economy is the most important problem facing the country. This means it will play a role in the voting booth, but how much so remains to be seen.WHAT IS INFLATION?In September 2022, the inflation rate hit 8.2%, meaning that prices across a broad range of consumer goods and services are up year over year. Inflation describes how much the price of goods and services increases over time. It is tied to supply and demand, meaning that when demand increases for goods and services but their supply is low, their price will increase. A little inflation is considered healthy for an economy, around 2% year on year. When inflation becomes too high though, as is the case now, it can damage the economy, causing economic hardship as prices eat into budgets and lower profits. WHY IS IT HAPPENING NOW?The causes of inflation are multifaceted and often occur simultaneously. Experts point to a couple of key reasons for high U.S. inflation. The COVID-19 lockdowns during the height of the pandemic caused many to stay at home and shelter in place. This meant that Americans were spending far less money. As businesses shut down, many were laid off. Unemployment hit a record high of 13% during the second quarter of 2020. When the COVID-19 vaccines arrived and cases began to drop, many restrictions were eased, allowing people to head back outside and begin to spend again. There was a rush from consumers to take advantage of the goods and services they were denied during the pandemic, like vacations and dining out. Government aid in the form of stimulus checks, unemployment payments and child tax credits also pumped more money into the economy. This created a surge in demand.However, the supply lagged behind. Recently reopened businesses faced a mountain of challenges to provide goods and services to consumers after the pandemic. On top of staff shortages spurred by sick workers and changing work patterns, supply chains also completely broke down. The pandemic disrupting supply chains, as well as the war in Ukraine, put additional pressure on key resources like gas and grain. Continued COVID-19 lockdowns in China, a key exporter in global supply chains. HOW IS IT AFFECTING PEOPLE?All of those factors add up to create a hot, inflationary economy that hurts the most vulnerable Americans. After the financial turbulence that the pandemic caused, inflation is causing even more stress to American families. Tanya Parus, a Sarasota County, FL, mom of 2 said she has had to change her grocery store habits to accommodate for inflation.“Unfortunately I don’t think I could afford to eat the way that we were eating before,” she said.Daniella Knight, an Annapolis, MD, mother of three has also been hit hard by inflation. “All of our expenses have kind of skyrocketed,” she said.It’s not just families but also small businesses that have been affected. The State Director of the North Carolina Small Business Technology Development Center Byron Hicks said inflation is cutting into margins.“Small businesses work on a very small slim margin. Raw materials are higher, fuel prices are higher, and small businesses can’t escalate their pricing as quickly as corporations can,” he said. HOW ARE POLITICIANS RESPONDING?The whole world is going through an inflation crisis currently, with countries like the U.K. and Turkey facing higher inflation rates than the U.S. That being said, when the economy hurts voters, they often turn the blame on the government in charge. One July YouGov poll shows that 45% of voters give President Biden a lot of responsibility for inflation, and 28% give him some responsibility. Given how important the issue is to Americans, both parties are doing what they can to sway voters before Nov. 8. Republican candidates are placing blame on the Biden administration’s policies of spending, and claim stimulus spending during the pandemic made the situation worse. There is some truth to this claim, as some economists estimate that pandemic spending accounted for between 1 to 4% of inflation. Many families needed the stimulus money to survive during the pandemic, including Ms. Knight.“If we had not received the stimulus or the unemployment, then we would not have survived, we would not have survived … Our youngest would not have been able to attend preschool,” she said. When Democrats discuss the economy, they mention the recently passed landmark Inflation Reduction Act as a solution. Two studies have shown that the bill is unlikely to affect inflation in either direction, but will instead lower some costs like prescription drug prices and lower the national deficit. Some Dems also claim that amid record company profits, corporations are adding to inflation by raising prices in an act of greed. Economists are undecided as to whether rising profits have added to inflation. Given how big of an issue inflation has become, Americans are bound to cast their votes with the economy in mind. Who can tackle the challenge better is for voters to decide. WHAT CAN BE DONE ABOUT IT?The hard truth is that little can be done by the government to tackle inflation. The power lies mostly in the independent entity which is the Federal Reserve. The Fed has the power to raise and lower interest rates in order to stabilize the economy, and keeping a stable economy is its sole job. The Fed has introduced a series of interest rate hikes in an attempt to slow the economy and decentivize spending. It is beginning to work, especially in the housing market which has seen high borrowing costs. The government has little recourse for action towards inflation. A few tactics they could implement include raising taxes, removing import tax tariffs, limiting prices and reducing spending. Ultimately though, the solutions to limit inflation rely on the federal reserve and the behavior of global markets, not on politicians.
The economy is a major issue heading into the midterm elections, with one NYTimes/Siena poll showing 44% of voters stating inflation and the economy is the most important problem facing the country. This means it will play a role in the voting booth, but how much so remains to be seen.
WHAT IS INFLATION?
In September 2022, the inflation rate hit 8.2%, meaning that prices across a broad range of consumer goods and services are up year over year. Inflation describes how much the price of goods and services increases over time. It is tied to supply and demand, meaning that when demand increases for goods and services but their supply is low, their price will increase.
A little inflation is considered healthy for an economy, around 2% year on year. When inflation becomes too high though, as is the case now, it can damage the economy, causing economic hardship as prices eat into budgets and lower profits.
WHY IS IT HAPPENING NOW?
The causes of inflation are multifaceted and often occur simultaneously. Experts point to a couple of key reasons for high U.S. inflation.
The COVID-19 lockdowns during the height of the pandemic caused many to stay at home and shelter in place. This meant that Americans were spending far less money. As businesses shut down, many were laid off. Unemployment hit a record high of 13% during the second quarter of 2020.
When the COVID-19 vaccines arrived and cases began to drop, many restrictions were eased, allowing people to head back outside and begin to spend again. There was a rush from consumers to take advantage of the goods and services they were denied during the pandemic, like vacations and dining out. Government aid in the form of stimulus checks, unemployment payments and child tax credits also pumped more money into the economy. This created a surge in demand.
However, the supply lagged behind. Recently reopened businesses faced a mountain of challenges to provide goods and services to consumers after the pandemic. On top of staff shortages spurred by sick workers and changing work patterns, supply chains also completely broke down. The pandemic disrupting supply chains, as well as the war in Ukraine, put additional pressure on key resources like gas and grain. Continued COVID-19 lockdowns in China, a key exporter in global supply chains.
HOW IS IT AFFECTING PEOPLE?
All of those factors add up to create a hot, inflationary economy that hurts the most vulnerable Americans. After the financial turbulence that the pandemic caused, inflation is causing even more stress to American families.
Tanya Parus, a Sarasota County, FL, mom of 2 said she has had to change her grocery store habits to accommodate for inflation.
“Unfortunately I don’t think I could afford to eat the way that we were eating before,” she said.
Daniella Knight, an Annapolis, MD, mother of three has also been hit hard by inflation.
“All of our expenses have kind of skyrocketed,” she said.
It’s not just families but also small businesses that have been affected. The State Director of the North Carolina Small Business Technology Development Center Byron Hicks said inflation is cutting into margins.
“Small businesses work on a very small slim margin. Raw materials are higher, fuel prices are higher, and small businesses can’t escalate their pricing as quickly as corporations can,” he said.
HOW ARE POLITICIANS RESPONDING?
The whole world is going through an inflation crisis currently, with countries like the U.K. and Turkey facing higher inflation rates than the U.S. That being said, when the economy hurts voters, they often turn the blame on the government in charge. One July YouGov poll shows that 45% of voters give President Biden a lot of responsibility for inflation, and 28% give him some responsibility. Given how important the issue is to Americans, both parties are doing what they can to sway voters before Nov. 8.
Republican candidates are placing blame on the Biden…
Read More:How will inflation affect voters decisions in the midterms?
2022-11-05 21:23:00
