Opinion by Catherine Rampell: There’s not a ton that most politicians can do to push inflation down. The few, limited tools they have available might carry some political risk.
So far, the Biden administration and federal Democratic lawmakers have been reluctant to adopt such measures. Perhaps they fear alienating crucial allies . Maybe they worry about providing fodder for right-wing attacks about being “soft on China.”
The other obvious way to deal with that demand-supply disparity involves reducing demand. This is precisely what the Federal Reserve is doing. By raising interest rates, the central bank is making borrowing more expensive, which in turn cools spending, particularly on big purchases .This is undoubtedly a more painful way to deal with inflation.
Unfortunately, both federal and state politicians have lately decided to make the Fed’s already hard job even harder. The main lever politicians seem to want to pull in times of economic turmoil is to cut taxes or otherwise send out money. And, look, in some scenarios sending out checkshelpful — if we’re in a recession, say, and facing the risk of deflation. Then it’s useful to give households cash to support their spending, particularly if those households have suffered job losses.But now is not one of those times.
Federal politicians are also weighing other measures that might, on the margin, juice demand and thereby make inflation worse, such as a gas tax “holiday” or broad-based student debt forgiveness. Some federal Democrats are even pushing punitive measures that might reduce supply, such as
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