A lesson for politicians — avoid inflation at all costs

For a long time, it’s been a running joke: Ask me if the economy is heading for a recession and I would tell you it’s six months away.
Always six months. Whether the indicators were surging inflation, rising interest rates or whatever, things were fine now, but don’t be so certain about six months from now.
Six months later, the answer would be the same.
But now … well, I just don’t know any more. Things look sunny as far as the eye can see.
CNN, Bloomberg, the Financial Times, the Capital Brief and even Harvard Law Today and more have all published stories in the last few days with variations on a headline that says the Federal Reserve may have managed the elusive soft landing — wiping out inflation without destroying the economy.
Except, you don’t seem to be buying it.
The latest Deseret News/Hinckley Institute of Politics poll, conducted by HarrisX, found 71% of Utahns believe the U.S. economy is on the wrong track. Also, 48% said their own personal financial situation was getting worse, with just 19% saying it was getting better.
And, while the Conference Board reported this week that consumer confidence took its highest leap forward in more than three years in October, it’s sobering to note that about 65% of those surveyed still believe a recession is either somewhat or very likely over the next 12 months.
Which at least is six months further out than I used to predict.
So, what gives? How can so many indicators show things are fine, while so many people feel they aren’t?
A lot of experts say it’s really fairly easy to explain. As a Washington Post editorial said earlier this year, “The main answer is inflation.”
We may be experiencing a soft landing, but it’s like taking off in an airplane from somewhere at sea level and landing softly at a mountain airport. It’s a nice place, but you’re still a lot higher than where you started. And you’re not going back.
Since the start of the pandemic, the Post said, inflation is up 21%. And, while wages nationally are up 22%, “higher prices tend to have more of a psychological impact.”
The world today is different from the one I grew up in during the ‘60s and ‘70s. People expected inflation back then. They grew used to it. Today, people still remember what groceries cost before 2022, and even if inflation is now down considerably, they’re unhappy that prices haven’t gone back to those levels.
This is creating an interesting situation heading into Tuesday’s election deadline.
Meanwhile, the Commerce Department issued an economic report this week that was undeniably rosy. The nation’s gross domestic product was up 2.8% during the third quarter of the year. Consumer spending, a strong measure of economic strength, increased 3.7%
By one measure, prices rose just 2.1% in September compared to a year earlier, which is just a whisker above the Federal Reserve’s 2% target. The average price of gasoline is down 39.8 cents per gallon from over a year ago, according to GasBuddy, and analysts say it soon will be below $3 a gallon nationwide.
A jobs report Friday looked weak, but unemployment is steady at 4.1%.
Normally, election watchers would say this type of report, coming just days before the election ends, would be good news for the incumbent party in the White House. But that doesn’t seem to be the case this year.
Republican strategist Mark Campbell told The Washington Post, “This is the first presidential election in 50 years or so where the driving issue is what things actually cost at the grocery store.”
Look closely at the Deseret News/Hinckley Institute of Politics poll. Among Republicans, 78% said the economy is on the wrong track, while only 35% of Democrats agreed. Among independents and other party members, the figure was 75%.
Whether a recession is six months away or 12, it really doesn’t matter. We won’t know for sure until after Tuesday which economy will be more important to the election outcome — the one in which consumers spend a lot and enjoy favorable conditions or the one in which groceries still cost much more than a few years ago.
But one lesson is crystal clear. Politicians should avoid inflation-driving policies in the future at all costs. Even if the government can orchestrate a soft landing, it can’t erase the memories.