GOP Has No Inflation Plan as U.S. Economy Grows

To listen to Republican campaign ads, the U.S. economy is a hellscape and solely the fault od Democrats - never mind Russia's war and Ukraine and the backstabbing Saudis who cut oil production to keep prices high.  The new ecomic data released yesteday shows a different picture with the economy growing 2.6% in the third quarter and unemployment at 50 year lows.   On top of this the reality is that the GOP has no economic plan to cut inflation and, if in control of Congress, would engage in another round of reverse Robin Hood policies and an increase in the deficit which has fallen under the Biden administration.  Two pieces look at the situation and the GOP's lack of any economic plan.  First this from the Washington Post on the latest economic numbers:

The U.S. economy grew at an annual rate of 2.6 percent in the third quarter, marking its first increase in 2022 and a sharp turnaround after six months of contraction — despite lingering fears that the country is at risk of a recession.

The report on gross domestic product, released Thursday by the Bureau of Economic Analysis, revealed a more upbeat snapshot of the economy less than two weeks before the midterm elections, even as high inflation has proved a persistent problem for Democrats.

Even though consumers bought fewer goods, they continued to spend on health care, which helped lift the reading on GDP, which sums up goods and services produced in the U.S. economy. An increase in government spending at the federal, state and local levels also contributed to the gains.

The biggest boost, though, came from a narrowing trade deficit, with American retailers importing fewer items and exporting more goods as well as services, such as travel. That is a stark reversal from earlier in the year, when the gap between incoming goods and outgoing ones was at its widest on record.

A number of recent indicators point to a broader cooling of the economy, most notably in the housing market. Home sales have tumbled for eight straight months and are likely to keep falling because of rising interest rates. And average mortgage rates for 30-year loans exceeded 7 percent for the first time since the early 2000s, Freddie Mac reported this week.

Still, the turnaround in GDP comes at a crucial time for Democrats, who are racing to assuage voter concerns about the economy ahead of the midterms in early November. Inflation — with gas prices in particular — has been one of the biggest political challenges for the White House.

“Today we got further evidence that our economic recovery is continuing to power forward,” Biden said in a statement, adding, “Our economy has created 10 million jobs, unemployment is at a 50 year low, and U.S. manufacturing is booming. … Now, we need to make more progress on our top economic challenge: bringing down high prices for American families.”

Republican lawmakers were quick to push back. Economic growth, they said, was fleeting and likely to reverse in coming months.

“We’ve seen very clearly a slowdown in consumer spending over the course of the year,” said John Leer, chief economist at Morning Consult. “There’s been a pretty dramatic reallocation of spending because of elevated levels of inflation. Consumers are devoting a larger share of their wallets to food, gas and housing, while pulling back in other areas.”

The positive report follows two quarters of contraction. Those declines met one definition of a recession, though the official determination is made by a private group of experts. The U.S. economy shrank by 1.6 percent in the first quarter, then 0.6 percent in the second, according to revised estimates from the government.

For now, though, hiring remains brisk and the unemployment rate, at 3.5 percent, is near historic lows. And although consumers are pulling back on some items — such as homes, cars and appliances — they are continuing to spend on travel and dining out, which is helping prop up the economy.

A range of major companies, including Bank of America, Johnson & Johnson and Lockheed Martin, have reported better-than-expected sales and profits in recent weeks, reflecting strength in the corporate sector.

[B]usiness has been booming at Stowe Mercantile in Stowe, Vt. . . . “Our revenue is strong as ever, and we have a solid staff, so the increased revenue supports increasing all those wages,” Sherman said. “At the same time, we’ve seen no real slowdown. The drumbeat for a recession seems to get louder by the week, and yet we aren’t seeing anything in our business.”

As for the GOP's lack of any beneficial economic plan, a column in the New York Times by a Nobel Prize winning economist looks at the reality of the GOP agenda.  Here are highlights:

Few things I’ve written in recent years have generated as much hate mail as a relatively low-key, somewhat nerdy newsletter I put out just before the release of data on gross domestic product for the second quarter of 2022. In that newsletter I explained why, despite a lot of misinformation in the news media, a recession is not defined as two quarters of declining G.D.P. and the first half of 2022 was unlikely to meet the actual, multidimensional criteria used by the committee that determines (after the fact) whether a recession has started.

The reason for the hate mail was, of course, that Republicans were eager to declare a “Biden recession” and falsely accused the administration of a double standard when it said that we were not, in fact, in a recession.

Well, Thursday’s advance G.D.P. report for the third quarter of 2022 showed why a recession call based on two quarters of somewhat bizarre data would have been all wrong. Economic growth has rebounded, back up to 2.6 percent at an annual rate — putting G.D.P. back in line with strong employment growth, which has continued throughout the year.

For now, suffice it to say, we weren’t in a recession earlier this year and aren’t in a recession now, although we could find ourselves in one in the future as delayed effects of rising interest rates kick in.

Republicans have largely given up on the recession story. Instead, their economic attacks, in both debates and campaign ads, have been focused overwhelmingly on inflation, especially gas prices.

It therefore seems worth pointing out that the G.O.P. doesn’t have a plan to fight inflation. Actually, it doesn’t have any coherent economic plan at all. But to the extent that Republicans have laid out what they will try to do if they win the midterms, their policies would make inflation worse, not better.

When pressed about how, exactly, they would reduce inflation, Republicans often fall back on some version of “Gas was only $2 a gallon when Trump left office!” So let’s talk about that comparison.

First, it’s remarkable how the right has reimagined January 2021 as a golden moment for America. At the time, about 20,000 Americans were dying from Covid every week; there were still nine million fewer jobs than there had been before the pandemic. Indeed, the still-depressed state of major economies, including that of the United States, was the main reason world oil prices were unusually low, which in turn was the main reason gas was cheap.

And despite G.O.P. rhetoric, Biden administration policies have had little impact on gas prices, which have been driven by events affecting world markets — notably Russia’s invasion of Ukraine — and to some extent by bottlenecks in refining, which grew worse for several weeks starting in mid-September but have eased again.

So what is the Republican plan to bring gas prices down? There isn’t one. . . . . If you’re worried about the inflationary impact of budget deficits, however, you should know that almost the only concrete economic policy idea we’re hearing from Republicans is that they want to extend the Trump tax cuts, which would … substantially increase the deficit.

It’s true that many Republicans adhere to an economic ideology that doesn’t see deficits caused by tax cuts as a problem, either because they believe — in the teeth of all the evidence — that tax cuts somehow pay for themselves, or because they believe that government spending, not deficits per se, is what causes problems.

But if you believe that cutting taxes without any plausible plan for offsetting spending cuts isn’t a problem even in a time of inflation, markets beg to disagree.

Look at what happened to the pound and British interest rates after Liz Truss, the quickly deposed prime minister, announced an economic plan that, broadly speaking, looks a lot like what Republicans are proposing here.

The bottom line is that while the G.O.P.’s election strategy is all about blaming the Biden administration for inflation, the Republican Party doesn’t actually have any plan to reduce inflation. To the extent it has an economic plan at all, it would make inflation worse.

Don't be fooled by GOP lies.