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Tuesday, November 29, 2022

Lancer’s Mailbag: Are Democrats To Blame For High Inflation?

“Mailbag” gives me insight into the comments and emails I receive from my readers – good, bad or in-between – and my thoughts about their response.

Inbox: Readers may think I’m missing a big piece of the story of inflation at its highest in four decades: politics.

Feedback “the real root cause of this hellish inflation is due to the policies of the Biden administration, the Democrat Party and their gullible, gullible supporters” from “not to mention a much bigger cause of inflation,” White’s current occupant of the House, From “Lying Democrats raise the cost of everything far more than Republicans.”

my answer: It’s time for trusty spreadsheets, though I know, no matter what math I use, someone will always complain!

To test my audience theory, I looked at World War II inflation rates and which party controlled the White House. I also stunned the six-month results – so the credit or blame for what happened in the presidential transition years was somewhat shared.

Let me note that the President is merely a force playing a role in the changing cost of living. The inflationary climate is determined by everything from foreign economic and political influences to worker-to-boss relationships and the rate-setting Federal Reserve.

The spreadsheet found that over nearly 80 years, inflation averaged 3.69% when Democrats were in command versus 3.59% for Republicans. It’s not much of a difference, but we know that politics is a “what have you done for me lately” business.

Looking at the cost of living since 1944 when Democrats had a White House, inflation rose in four out of five eras—from the year before the Democrats came to power, to their final year.

For Republican presidents, inflation grew by the same metric in only two out of five periods of control.

Warning

There is another side to inflation as well. This often moves in the opposite direction of unemployment, because you typically need to hire a lot for prices to overheat.

[Inflationaveraged53%duringPresidentHarryStrauman’stenureattheWhiteHousefrom1945-1952—thethirdhighestin10presidenciessinceWorldWarII[1945-1952तकव्हाइटहाउसमेंराष्ट्रपतिहैरीएसट्रूमैनकेकार्यकालकेदौरानमुद्रास्फीतिकाऔसत53%था-द्वितीयविश्वयुद्धकेबादसे10राष्ट्रपतिकालमेंतीसरासबसेअधिक।यहां1951कीएकफाइलफोटोमेंट्रूमैनकोवाशिंगटनमेंकैपिटलहिलपरअपनास्टेटऑफदयूनियनपतादेतेहुएदिखायागयाहै।(एपीफोटो/बायरनरोलिंसफाइल)

So, let’s look at US unemployment in the same period after WWII, using the same math: unemployment averaged 5.7% with a Republican in the White House, slightly higher than the Democrats’ 5.6% rate.

Unemployment rose during all five periods of Republican control and only once under Democrats.

ground level

This math shows us that blaming the president or his party for inflation is reactionary and foolish, no matter who is in charge. The cost of living in America, in particular, is often heavily influenced by factors beyond the reach of the world’s most powerful leader.

Yes, President Joe Biden – a Democrat – has seen inflation average 6.5% over the past 12 months, up from 1.3% in 2020 before he was elected. If this 5.2% jump represents Biden’s entire presidency, it would only top Democrat Jimmy Carter’s 1977-80 days in the White House, which predates World War II.

If it’s Biden’s fault, he should also get credit for unemployment, which has fallen from 8.1% in 2020 to an average of 4.6% over the past 12 months. That 3.5-point drop was bested by Democrat Bill Clinton’s 1993-2000 White House.

If you ignore politics altogether, the key risk identifying these figures for 2022 is the Fed.

The dual functions of the central bank include monitoring inflation while monitoring the health of the job market. And with the cost of living skyrocketing at a pace not seen in four decades, the Central Bank is now raising interest rates, which control demand for goods and services, to cool and slow inflation.

Can the Fed’s imposed chill be done so cleverly that it doesn’t cost millions of jobs?

And you tell me which is worse: Inflation taking away from your paycheck or no paycheck at all?

Jonathan Lancer is business columnist for Southern California Newsgroup. He can be contacted at [email protected]

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