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INFLATION DRIVES OUR POLITICS IN 2022 — AND MAYBE 2024, TOO. The brief period in which some Democrats hoped that abortion would be the decisive factor in midterm races appears to be over. When the Bureau of Labor Statistics announced recently that inflation remains high and persistent, predictions that the cost of living would diminish as a factor in our politics were proven wrong. Poll after poll after poll shows inflation is the voters' top concern. It is driving the midterm elections. Yes, abortion and crime and the border are issues. Democrats hope that former President Donald Trump, under relentless pursuit by the Justice Department, the attorney general of New York, a prosecutor in Georgia, and others, will be a factor, too. But inflation is the shaping factor, the driving factor, in the 2022 midterm elections. Here is a troubling thought. It could well be that inflation, and the chain of events set off by inflation, will be the driving factor in the 2024 presidential election, too. Just look at the hope-dashing news conference given by Federal Reserve Chairman Jerome Powell this week, when the Fed raised interest rates another three-quarters of a point. Subscribe today to the Washington Examiner magazine that will keep you up to date with what's going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue! First, Powell made clear that the Fed intends to raise rates again soon, likely this year. More increases, on top of those already made, will make it increasingly expensive to borrow money, whether for a business or buying a house or making a consumer purchase. That slows down economic activity. And that means people will lose their jobs. Put that together, and you have a recession. And that, finally, will bring inflation down. "I wish there were a painless way to do that, but there isn't," Powell said Wednesday. "So what we need to do is get rates up to the point where we're putting meaningful downward pressure on inflation, and that's what we're doing." For months, many observers had hoped that the Fed would be able to slow inflation without bringing on a recession — the so-called soft landing scenario. Skeptics pointed out that soft landings are extremely rare. And on Wednesday, Powell pretty much put an end to soft landing hopes. "We have always understood that restoring price stability while achieving a relatively modest ... increase in unemployment and a soft landing would be very challenging," he said. "And we don't know, no one knows, whether this process will lead to a recession or, if so, how significant that recession would be." The longer it takes to restore price stability, Powell said, "the chances of a soft landing are likely to diminish." The message was clear: A soft landing would be nice, but it's probably not going to happen. Here's the political side of it. The Fed envisions a long fight against inflation. It has raised interest rates 3 percentage points so far this year. It is promising more. This problem will not go away by the end of this year. And if — when — the Fed's policies bring on a recession, how long will that last? The presidential election campaign starts right after the midterm elections. There will be a lot of campaigning in the first months of 2023. Candidates will no longer pretend that they're campaigning for midterm candidates and start campaigning for themselves. Activity will pick up in the summer and fall as the caucuses and primaries, beginning in January 2024, near. Of course, it is impossible to know what will dominate the campaign. Huge, entirely unforeseen events could happen that dominate our politics for years — a 9/11 or a pandemic or something. But we do know, now, that the economic outlook promises to be rocky not just in this midterm campaign season but at the beginning of the presidential campaign cycle. At least the beginning of the 2024 campaign will be about inflation, just as the 2022 campaign was. For a deeper dive into many of the topics covered in the Daily Memo, please listen to my podcast, The Byron York Show — available on the Ricochet Audio Network and everywhere else podcasts can be found. You can use this link to subscribe.
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