America isn’t panicking about inflation

Despite what some pundits and politicians would have you believe may be warranted, Americans are not panicking about inflation. Still, many are keeping an eye on it. And how worried they are depends on their political affiliation — as well as what they’re watching on TV.

When asked what the most important economic issue is facing the country today, about a quarter of likely voters say it’s the high cost of living or inflation, according to a new poll by Vox and Data for Progress. Voters also say they’re worried about the economy in general (19 percent), the gap between the rich and the poor (14 percent), unemployment and jobs (10 percent), and national debt (10 percent).

When you drill down to who is worried about prices, that’s where it gets interesting. In general, people with incomes of under $50,000 a year are slightly more concerned than those who make upward of $100,000.

Ethan Winter, a senior analyst at Data for Progress, said it’s difficult to separate out what is sensitivity to inflation — meaning a general rise in prices of a basket of items as measured by something like the Consumer Price Index — and just a hyper-awareness of prices overall. “Poorer people are just more concerned about prices, and you have to separate what’s a general concern about how much things cost versus what’s a concern about you actually perceiving things getting more expensive,” he said.

The Vox-Data for Progress poll, fielded from July 23 to July 26 among 1,245 likely voters, shows that people with incomes of under $50,000 reported they are much likelier to be worried about the cost of food and housing than people making over $100,000. Thirty percent of lower-income voters said housing costs were their top price concern, while only 15 percent of higher-income people said the same. Meanwhile, higher-income people are likelier to be worried about the cost of medical care and higher education or student loans, which are often bigger-ticket items than groceries or rent.

Perceptions of costs and inflation also have quite a partisan slant. Republicans are likelier to say that’s their main economic concern than Democrats (31 percent to 19 percent). Television viewing habits make the division even starker: 34 percent of Fox News viewers say costs and prices are the most pressing economic issue, compared to 22 percent of non-Fox News viewers.

“There are a lot of partisan signals in the air,” Winter said. “Republicans are being told by partisan outlets that inflation is a cause for concern and are responding to that, while we see much lower rates of concern with Democrats — even though real economic conditions are the same.”

As Jim Tankersley at the New York Times notes, Republicans are using concerns about price increases to attack President Joe Biden’s economic plans and try to undercut his push for more infrastructure spending. Sen. Pat Toomey (R-PA) said in a recent appearance on CNN’s State of the Union that the United States has “serious inflation” right now. “There is a question about how long it lasts. And I’m just worried that the risk is high that this is going to be with us for a while.”

Many Democrats in Congress hope to pass a multitrillion-dollar infrastructure plan in addition to a smaller, bipartisan proposal. The Vox-Data for Progress poll found that 55 percent of likely voters support a “broad infrastructure package” as an investment in America’s future, while 36 percent oppose a broad package and believe it will lead to a dramatic price increase. Nine percent are unsure. And again, there’s a stark partisan divide.

Chatter about rising prices and inflation has certainly picked up in recent months. And it is true that a lot of everyday items feel more expensive right now than they used to — especially compared to a year ago, when the prices of some items, like gas, had fallen at the start of the pandemic. (Your summer vacation may have been cheaper a year ago than now, but then again, a year ago, you might not have gone on vacation.)

But many Democrats, economists, and members of the Federal Reserve hold that the current levels of inflation are temporary and will slow. There are a lot of supply-demand imbalances and bottlenecks in the economy right now due to the Covid-19 pandemic, and it’s just going to take a while for things to work themselves out.

In an interview with CNBC in July, Treasury Secretary Janet Yellen said she expects to see “several months of rapid inflation” but expects the situation to smooth out. “I’m not saying that this is a one-month phenomenon. But I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”

Per the Vox-Data for Progress poll, Americans appear to generally agree inflation will slow down. Fifty-eight percent of likely voters said they believe that price increases are mainly due to temporary bottlenecks and shortages caused by the pandemic. However, there’s a stark partisan divide: 76 percent of Democrats believe that to be true, compared to 56 percent of independents and 39 percent of Republicans.

On inflation, voters are willing to keep calm and carry on

There is some handwringing about today’s inflation becoming like the runaway case of the 1970s, but the comparison appears overblown. Still, it’s hard to dismiss people’s anxieties about prices and the economy altogether. Especially for lower-income people, even a modest increase in costs can be a big deal.

And yet, voters don’t appear to be jonesing for the federal government to tap the brakes yet. Nearly two-thirds of likely voters say they think policymakers need to stay calm about inflation as the economy improves — including a majority of Democrats, independents, and Republicans — over slowing economic growth.

The Federal Reserve, which has a number of tools in its monetary policy toolkit to try to influence the economy, thus far is following this calm approach to economic developments. In July, the Federal Open Market Committee (FOMC) decided to keep interest rates at near-zero (if it starts to worry about inflation, it will start to hike them) and signaled that while the economy is improving, there’s more progress to be made. “The effects of the pandemic on the economy have continued to diminish, but risks to the economic outlook remain,” Federal Reserve Chair Jerome Powell said in a press conference on July 28.

Overall, likely voters are likelier to say that jobs and wages are more important than prices.

If the Federal Reserve starts to take its foot off of the gas, by raising interest rates (which still appears to be somewhat in the distance) or slowing the purchase of bonds (effectively slowing the printing of money), that will likely serve to cool down the economy. Deciding when to do that can be tricky. The Fed’s mandate is to balance modest inflation (generally about 2 percent over the long term) with unemployment, ideally driving the economy as close to full employment as possible.

But it matters which unemployment rate the Fed, or, for that matter, anyone is looking at. Historically, unemployment for Black and Hispanic workers in the US has run much higher than unemployment for white workers, and that continues to be the case as jobs return. In June, the overall unemployment rate was 5.9 percent. But when broken down by race, unemployment was at 5.2 percent for white workers, 7.4 percent for Hispanic workers, and 9.2 percent for Black workers.

William Spriggs, chief economist at the AFL-CIO, recently wrote an op-ed for the New York Times stressing the importance of paying attention to the Black unemployment rate in making policy decisions. “Ignoring the Black unemployment rate isn’t just a moral issue; it ignores potential growth for the economy,” he wrote.

A majority of people appear to agree that the racial divide in the workforce matters. The Vox-Data for Progress poll found that 52 percent of likely voters — including 75 percent of Democrats, 50 percent of independents, and 30 percent of Republicans — believe the federal government should try to close the racial gap in unemployment.

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