It was the summer of 1979, and President Jimmy Carter objected. Americans are paying much more for gasoline and groceries than the previous year, and Carter faces a choice: he can tell the Americans that this is a problem that the government can solve, or he can tell them to tighten their belts and stick to it.He chooses the latterBut prices continued to rise, and Carter was defeated by Ronald Reagan in 1980 In the landslide.

Things are not as bad as in 1979, but for many people, compare Still appropriate. According to the latest consumer price index data, prices in November rose 6.9% year-on-year, the highest increase since 1982. Consumer confidence close to historical lows and a Net approval rate President Biden’s approval rate is -7.6 percentage points.Biden once said Reversing inflation is a priority For his government, he has Release of strategic petroleum reserves And announced the plan “Alleviate bottlenecks“In response to rising prices, but The difficult and uncertain road In front of you.

It’s no secret Inflation is politically strongYou can’t miss the rising prices. Research has found that Americans are very concerned about inflation. But the politics of dealing with it is chaotic, and if prices continue to rise, Biden’s task is very difficult. He is facing a country that views inflation through a highly partisan perspective-which will judge his performance on this issue accordingly. If he ignores inflation, it may spiral up like Carter. But at the same time, if Biden reacts too strongly, Cure may be worse than disease.

The unique position of inflation in American psychology is not good for the president

Inflation occupies a unique place in American life. This is partly because price increases are more pronounced than things like government deficits; they are also the frontier and center of ordinary consumers.Coupled with the power of political memory: Great inflation brought Four recessions from 1969 to 1982 And had Have an indelible influence on our politics.

However, trying to pinpoint the cause of today’s inflation is challenging.Pandemic Changed the economy, Many experts pointed out The peculiarities of this economic recovery As the main driver of inflation. Austin GulsbyProfessor of Economics at the University of Chicago Booth School of Business emphasized to me that the anomaly of the downturn caused by the pandemic is the key to understanding the price increases we are seeing now.

“This is a serious recession, but it’s not actually a recession. It doesn’t look like an economic recession,” Gulsby said. “Usually, it is the delayed long-life products, such as consumer durables and housing, that cause economic downturns. These things have risen during the economic downturn.”

But although Gulsby is in One side of the debate Think current Inflation is temporaryHe admitted that even if the economy returns to normal in the summer, the Biden administration will be “heartburned.” There are good reasons for this: as shown in the chart below, since at least 1960, sharp inflation has coincided with several sharp declines in the president’s approval rating. In terms of his approval rating, Biden himself is currently in a downturn.

It is not clear how much inflation has to do with the president’s approval rating, but research does show that it hurts politicians in power.One 1999 studyFor example, it was discovered that unexpected increases in inflation have damaged the electoral performance of incumbent parties. A 2010 paper showed that inflation has Significant negative impact What Americans think of the president.the last one 2013 paper It is found that as the budget deficit and unemployment rate increase, the increase in inflation “results in[d] Deterioration in the popularity of the President of the United States”.

But in terms of inflation, some prices are more important than others.consider rising oil prize: One 2016 papers It was found that higher gasoline prices had a negative impact on the president’s approval, partly because Americans were constantly reminded of them. Carola BinderAn economics professor at Haverford College who studies inflation expectations and monetary policy told me that high oil prices are particularly likely to affect Americans’ assessment of the economy.

“When you drive on the road, you really see gasoline prices and big numbers, and you buy it more often,” Binder said. “So you are more likely to remember that if you saw it cost $2 last week, it is now $3.” Binder said that for family vacation price tags, this is not the case.

However, Americans who experienced inflation in the 1970s are also more likely to react negatively to higher natural gas prices.Every 2019 papersBinder and her co-author Christos Makridis found that Americans who had experienced the oil crisis of the 1970s were more pessimistic about rising oil prices than those who had not. This is because, as Binder said, “they built their economic operation model based on the economic operation in the late 1970s.”

Recent polls further confirm that Americans Feel the pressure of rising pricesAccording to a report in November, 45% of households reported facing “moderate” or “severe” difficulties due to price increases Gallup PollAnd 56% of voters in November Wall Street Journal Investigation Say that inflation has caused “major” or “minor” financial pressure on them. This pressure is especially severe for poorer Americans. According to a Gallup poll, seven out of ten adults in households with an annual income of less than $40,000 said the pandemic has caused them difficulties.

Although inflation has seriously affected the conscience of Americans, it is important not to exaggerate its impact, especially the impact on the president’s approval. For example, the graph above shows that George W. Bush’s approval rating fell during the Great Depression (a period of deflation).Even Carter’s re-election is doomed by some other key issues foreign And domestic. But this does not prevent Americans from paying attention to inflation, even if inflation is low. And, now, there is evidence that rising prices are hurting many Americans.

Americans’ perceptions of inflation are strongly influenced by politics

Although inflation affects all Americans, there is a gap in perception. In short, for how bad you think inflation will get, whether you belong to the same party as the president may be important.This more broadly reflects the increasing view of Americans on the economy Little to do with the economy Themselves; instead, they are about who is in the office.

Binder said: “When the president of your party is in power, you tend to be more optimistic about the economic situation, and inflation expectations tend to be lower.” More pessimistic, you will have higher inflation expectations.”

Recent research This is also confirmed, finding that when the party they support is in the White House, Americans expect inflation to drop significantly.According to a 2019 papersWhen Barack Obama was in power, inflation expectations in the red states were higher than those in the blue states only because of the reversal of positions when Donald Trump came to power.

This trend has existed for some time.For example, in the 1980s, the inflation rate fell by nearly 10 percentage points during Reagan’s administration, and more than 50% of the “strong” Democrats Say In a 1988 survey, inflation has worsened or worsened significantly, and less than 8% of people said the situation was much better (13% and 47% of “strong” Republicans, respectively, hold the same view).At the same time, according to a study conducted at the end of another Republican government, Bush’s More likely again According to the Republicans, inflation has increased in the past eight years.

Unsurprisingly, this division is also evident today: Under Biden’s leadership, Republicans Consistent Report Greater fear about economy – and inflation -Not the Democratic Party, and the differences don’t seem to disappear anytime soon.

The cure for inflation can be catastrophic

On the surface, Inflation is bad. if you Keep everything else unchanged, It will erode purchasing power and the value of the dollar.If Biden shows inaction, it is fear of inflation May become a self-fulfilling prophecy: Americans with higher expected costs may require employers to raise wages to offset inflation, which will cause employers to demand higher prices, which will lead to more serious inflation.

The problem is the solution-economics and politics- not that simple As an increase in interest rates to reduce inflation: there is a The cost of keeping inflation low, And we are often too fast to apply the brakes on the recovering economy.

“We only talk about inflation when inflation is high, and we don’t talk about inflation when it is low,” said Jonathan Kirshner, Professor of Political Science at Boston College, studies the politics of inflation. But he emphasized that no matter how high or low inflation is, inflation-oriented policies will ultimately pick out winners and losers in the economy. “Even if inflation is at a very low level, it is impossible to get rid of the political influence of inflation policy,” Kirshner added.

In addition, some policies aimed at tackling inflation—especially when the inflation rate is high—have already had a devastating effect. For example, the policies formulated by the Carter administration eventually eliminated inflation in the 1980s.First, the country Into a deep recession, Millions of workers lost their jobs.Dissatisfied building contractors and construction workers even mail Two by four chunks The Board of Governors of the Federal Reserve claims that wood is no longer needed because no one buys a house anymore. The political influence of inflation has not stopped because of Carter. Even with inflation under control, Reagan saw his approval rating drop.

but Recent episodes, Such as that Slow recovery from the Great Recession, And further questioned the advantages of taking a super hard-line approach to inflation. Kirshner pointed out that the double-dip recession of the 1930s was caused by fighting the inflation monster too quickly.Of course, inflation hasn’t approached the runaway levels of the 1970s, but we may Course correction is too fast, Just like we did in the 1930s and 2010s.

Considering that most of the other economic indicators of “stagflation” in the country in the 1970s did not exist, this may pose a big problem.In fact, the U.S. economy has back to normal According to multiple measures: unemployment Is falling rapidly ——Although the workers continue resign Collective-retail spending increases, households Saved more Higher than expected in the non-pandemic world (although there is some evidence that These savings are falling).

All of this means that Biden is trapped between rocks and hard places. He must address very real concerns about the overheating of the economy, while also being careful not to overreact to prices that may stabilize as things return to normal. At the same time, as long as the Democratic Party is in office, about half of the countries will evaluate the economy relatively critically, which complicates Biden’s approach. What is good for the economy in the long run may be bad for his political and electoral issues in the near term, and vice versa.

“People like me think that, at least in the short to medium term, you have to let this wave of inflation pass through the economy,” Kirshner said. “Is that good politics? I suspect it is terrible politics. But you choose from an unpleasant choice menu, especially in the current political environment, any unpleasant choices you make Will be vilified by the opposition.”