Inflation and Crime

November 4, 2022

The U.S. midterm elections on November 8 are just days away, and Republicans appear headed for a very successful evening, vindicating their choice to focus the campaign on inflation and crime. America is in fact at a crossroads on many issues that ought to be debated, but Republicans took their lead from polls that identified high inflation and increased crime as the uppermost concerns of many voters. The decision to campaign on those issues appears to have been a well-rewarded strategy. Until very late in the campaign, Democrats failed to defend their records on those two issues, and that was a big tactical error. If Democratic Presidential candidate John Kerry in 2004 taught us anything, it’s that criticisms from one’s opponent must be acknowledged and the record corrected, however distracting the accusations might seem.

What about the claim that Republicans would manage inflation better that Democrats? The American with the greatest impact on inflation is in fact not an elected politician but rather the Federal Reserve chairman. Presidents appoint Federal Reserve governors, subject to the advice and consent of the senate. Once that protocol has been done, the Fed has great freedom to run monetary policy without political interference as however Fed officials see fit to deliver their mandates most effectively. Former Fed Chairman Arthur Burns, whose accommodative monetary policy sowed the inflationary conditions of the 1970s, was appointed by a Republican president. Paul Volcker, who delivered America from that inflationary dynamic, was appointed by a Democratic president. Alan Greenspan, whose tolerance of banking deregulation permitted unsafe practices that brought on the Great Recession, was appointed by a Republican. Ben Bernanke, an expert on policy mistakes in the 1920s and 1930’s, was appointed by a Democratic president and knew what had to be done to avert a second and possibly deeper Great Depression. The current Fed Chairman, Jay Powell, was appointed Chairman initially by former President Trump.

Republicans have placed blame for the current U.S. inflationary spike on the White House by tying such to the large federal deficit. But the deficit mushroomed initially after the 2017 mega-tax cut package when Trump was president. America’s mishandled policy response to Covid caused many more deaths than other countries experienced and necessitated pandemic relief that also widened the deficit. Russia’s war on Ukraine, a major producer of both energy and food, gave global inflation a huge extra boost. Perhaps if former President Trump had not bent over backwards to keep Russian President Putin pleased, maybe the latter doesn’t carry out the invasion, and inflation would not have extended its roots so deeply. Another question to ask is that if the Democrats have mishandled inflation so badly in 2021 and 2022, why is the U.S. dollar so strong in contrast to its chronic weakness in the 1970s? That stark contrast suggests that investors correctly understood that the inflation of the 1970s was largely homegrown and that this time it reflects non-U.S. factors to a much greater extent.

Regarding crime, while it’s true that national crime statistics have been rising, they remain well down from conditions prevailing in other historical times. It’s not surprising that the perception of crime actually outdistances reality. Local news has deteriorated progressively into a daily parade of crimes, fires, and other atrocities sprinkled with ten minutes of weather forecasting. In cities with millions of people, it’s not hard to get plenty of material day after day to make viewers think they are about to become a crime victim.

For another thing, crime prevention falls primarily under the jurisdiction of state and local governments. It takes something much broader, like an attack on the U.S. capitol building, to get the Feds heavily involved. As with inflation, it’s unclear what a Republican-controlled House and Senate would do better. Make the purchase and interstate trafficking of guns more prevalent than now? Enact tax and spending changes that promote wealth and income disparities in the country, which have been identified as a root source of anger and criminal behavior in the land? Impose a nationwide ban on abortion, bringing children to parents who neither want them nor have the resources to guide them into fruitful and law-abiding lives? Allow more unregulated media to stir up hatred of the “other” and foment panic in the people?

Republicans have identified what people fear most but haven’t demonstrated that they have the answers or inclination to fix problems whose existence helps get them elected and in position to perpetuate their power.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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