As a Democrat, I hate to deliver more bad news to President Obama after the defeat of 2010. But I must warn my party of a looming potential economic/political threat that could make the 2010 “shellacking” look mild.
Preliminary indications are that the nation may be in for another bout of inflation. With gas prices up over 15% this winter due to the turmoil in the Middle East, many economists and business reporters are worried that those higher costs will soon be included in the price of nearly everything. In addition, bad weather and increasing global population are causing food prices to rise.
The historical record shows that when prices rise rapidly, voters blame the federal government and take out their wrath on the party of “big government,” the Democrats. Right now, most voters believe that the recession and continuing high unemployment are the nation’s foremost problems. And many economists are more worried about “deflation” (falling jobs, prices, and incomes). But if inflation were to make an unwelcome comeback in the coming decade — especially when combined with already high unemployment — Republicans could win so big that they’d finally complete the across-the-board political realignment Karl Rove dreamed of. And a bout of “hyperinflation” — over 20% — could wreck the Democratic Party for a generation.
There are worrisome signs. CNBC conducted a survey of basic consumer products sold at Walmart (that nation’s largest retailer), and found prices increasing at an annual rate of 4% in the fall of 2010. “Inflation Rears Its Ugly Head” was the title of a recent editorial in Investor’s Business Daily, which noted:
America faces an equally serious but silent threat from within. Put simply, wholesale prices, often a trigger for consumer price rises, have taken off. In February, they rose at an 8% year-over-year rate. … There’s no easy way out. It starts with spending cuts and ends with the Fed turning off its money presses. If it doesn’t, and inflation takes hold, welcome back the ’70s.
Paul Krugman and other liberal economists argue that the “core” inflation rate, which excludes volatile food and energy prices, remains below 1%. Critics reply that the core measurement is irrelevant because everyone needs food and energy to survive.
So, some economists say that inflation is not on the horizon, while others say that it is already here but not accurately reported by government statistics. Others say it is here and will only get worse.
What follows is a political history of the electoral effects of inflation. Three times since the death of Franklin D. Roosevelt in 1945, Democrats have presided over rising prices and have been repudiated by the voters in the next election.
In the early 1950s, the costs of the Korean War helped cause the inflation rate to jump from an average of 1% in 1950 to nearly 8% in 1951. (All figures cited here come from the web site InflationData.com.) Combined with anger over the stalemate in Korea and various Truman administration scandals, Republicans — led by General Dwight Eisenhower — won the presidency for the first time since 1928, along a majority in both houses of Congress.
In 1964, President Lyndon B. Johnson defeated Republican Barry Goldwater with a record 61.1%. Political observers like Samuel Lubell (author of the prize-winning The Future of American Politics) wondered if we were in for decades of one-party Democratic governance. But the costs of the Vietnam War and LBJ’s “Great Society” programs helped push up prices from an average of 1% in 1964 to over 4% in 1968. Combined with anger over the stalemate in Vietnam, race riots, and anti-war turmoil, Republicans — led by Eisenhower’s vice president, Richard Nixon — narrowly won the White House just four years after being consigned to the ash heap of history.
After the Republicans lost the Watergate-influenced elections of 1974 and 1976, they were reduced to barely one-third of the seats in both houses of Congress. Many pundits wrote off the party’s future — The New Republic joked that “GOP” really meant “Groggy Old Party.” But Ben Wattenberg, a former speechwriter for President Lyndon B. Johnson, commented that there was “nothing wrong with the Republican Party that 20% inflation couldn’t cure.”