The subject of inflation has been front and center in the news for the past three years. Ever since the nation began to recover from COVID-19 with the introduction of vaccines in early 2021, there has been a constant debate over the nature of rising prices. Were they reflective of economic success and an outgrowth of rising employment? Or were they the harbinger of a horrific recession that would doom the Joe Biden presidency?
As with many other political predictions, the result has been a little of both. Unemployment remains low and growth is steady. But inflation continues to be a problem. Recent indicators have suggested that inflation remains a concern and may have been boosted by improving consumer sentiment over the past month. Observers now believe that the Federal Reserve will wait until June to begin cutting rates, if not longer.
The inflation question is much more important than Joe Biden’s poll numbers or the results of one election. Instead, the issue of inflation has been essential to the emergence of the modern Democratic Party. Inflation began as the cure to the nation’s ills. Whenever it becomes the nation’s most vexing problem, Democrats must tread lightly.
The Democratic Party’s origins
The modern Democratic Party can arguably trace its origins back to a proposal to introduce inflation. During the 1890s, farmers across the country were desperate for a solution to the problems associated with poor credit and overproduction. The solution they eventually landed on was inflation in the form of bimetallism. Coining silver at a 16-to-1 relationship with gold would increase the money supply and provide more money for farmers to pay off the mortgages they had contracted with bankers and financial leaders. The Democratic Party, mesmerized by the oratory of William Jennings Bryan, adopted bimetallism as the key tenet of its platform in 1896.
Bryan, of course, lost the presidential race in 1896, mostly due to a groundswell of opposition from the business community. But his goals were in many ways accomplished for him over the next decade. The country received its much-desired inflation not from bimetallism but from gold rushes in South Africa and Alaska. As Richard Hofstadter wrote in The Age of Reform, “after 1897 the new international supplies of gold brought that inflationary movement which the farmers had tried to win with silver.” The next decade was so successful for the nation’s farmers that reform energy moved on to the city and the Progressives throughout the 1900s and 1910s.
The next formative period for the Democratic Party also involved a need for inflation. In the early 1930s, the Great Depression created a deflationary spiral. Currency became scarce as banks failed and unemployment topped twenty percent. Franklin D. Roosevelt, as one of his many extraordinary acts during the Hundred Days, took the United States off of the gold standard and pushed a number of agricultural and banking reforms that contributed to inflation. This effort was only boosted by the Second World War.
Inflation as a public good
When inflation is needed, the Democratic approach to governance is acutely necessary. Democrats have performed well at times when the public believes prices need to rise. They came to power in 2009 during a time when the country was on the precipice of deflation following the financial crash. The party won the presidency again in 2020 during a similar period. News stories in early 2020 about the price of oil being negative pointed to a potential deflationary spiral halted by the actions of Democrats pressing on President Trump to provide immediate relief to the nation.
The situation for Democrats is completely different, however, when inflation is the nation’s overriding concern. The country does not want deficit spending, higher wages, or stronger labor unions. Instead, they want lower prices by any means necessary, even at the cost of higher unemployment. American voters rewarded Ronald Reagan for curbing inflation in 1984, even though his policies resulted in years of substantial unemployment and high interest rates. The unemployment rate was over seven percent when Reagan won every state but one in his reelection campaign. Donald Trump is receiving robust support even though nearly all of his stated policies would have the effect of increasing inflation.
Inflation can’t be ignored
Furthermore, the left is not united on the risk inflation poses to the Democratic ability to hold power. Liberals complain about inflation all the time. They post pictures of high grocery prices without stopping to consider what portion of those prices came from higher wages or gasoline prices. They hold out hope for anti-corporate policies or wage and price controls even though neither has been successful in curbing prices long-term in the past. The lack of a partisan lens on inflation means that Democrats feel vulnerable from both of their flanks, a recipe for political suffering.
Democrats need to take whatever action they can to unite on an approach to fighting inflation. They do not need to pretend that the problem does not exist or that Americans are not hurting. Instead, they need to show that while some inflation is natural and healthy, extreme levels of inflation are intolerable and will be curbed by Democratic policies. Inflation has been both a friend and foe of Democratic leaders for over a century. It is time for the party to find a consistent message on this issue that will continue to be essential for their grip on power.