Opinion: The political battle over inflation is a fight over who deserves the economy’s spoils

Editor’s Note: Meg Jacobs teaches history at Princeton University. Follow her on Twitter @MegJacobs100. The opinions expressed in this commentary are hers. Read more opinion on CNN.

CNN  — 

President Joe Biden stands accused of playing politics with petroleum. His opponents say the reason he is releasing millions of barrels of oil from the Strategic Petroleum Reserve is to bring prices at the pump down before the midterm elections. They might be right.

As public opinion polls reveal, the economy appears to be the top issue for voters.

As we approach the midterms, more and more candidates, especially in the GOP, are running on anti-inflation platforms. It’s nothing new. That’s because battles over inflation — what’s the cause, who is to blame, what is there to do — get to basic fights over who should have what. Should corporations earn bigger profits, should workers earn higher wages and should consumers shoulder the burden of both?

The Federal Reserve is responding to the highest rate of inflation in 40 years, and economists are debating whether the Fed should keep raising rates or pause, trying to find the sweet spot and guide the economy toward a soft landing.

But there is a disconnect between debates over policy and the political dogfights over high prices. The public, and its representatives, are having a very different discussion. They see this economic phenomenon as a competition over who deserves what.

The GOP political action committee One Nation has spent millions in Georgia to unseat Sen. Raphael Warnock, saying he has supported “reckless spending,” which it blames for recent inflation. Warnock and other Democrats argued in favor of the economic rescue package as needed to help people cope with the pandemic, but as The New York Times reported, they’re wary of trumpeting that spending now as the GOP blames it for inflation. That, too, is nothing new.

In 1952, Dwight D. Eisenhower, the decorated World War II general and GOP presidential candidate, aired the first televised political ad. The theme was inflation. Is the high cost of living getting you down? In the ad, he talks to an “average” housewife, who complains that “high prices are just driving me crazy,” and Eisenhower promises to fight on her behalf. That was at a time when inflation was less than 2%!

This strategy was a way of blaming organized labor — which in turn was a way of blaming the New Deal. In many spots, Eisenhower looked in the camera and said, “Instead of asking which party will bring prices down, why not ask which party has put prices up?” And then he broke a piece of wood in half to demonstrate the decrease in purchasing power since the end of World War II.

The campaign was largely successful. According to the GOP, organized labor was benefiting at the expense of middle-class consumers.

And there was something to it. This was the moment when for the first time the US census declared salaried, largely nonunion, white-collar workers outnumbered blue-collar industrial workers. Both groups prospered, but blue-collar union men and women were closing the wage gap with those who worked in offices. That meant that all sorts of semiskilled factory workers, of different races and ethnicities, were catching up to their better-educated White counterparts. Organized labor was at its peak of power, and unions even succeeded in getting cost-of-living adjustment clauses written into their contracts, a benefit that those who received an annual salary and were not a party to collective bargaining agreements did not have.

The Republicans, now in power, used “creeping inflation” to undercut labor’s newfound power. “Inflation is the great thief,” warned George Humphrey, Eisenhower’s first Treasury secretary. “The young, the old, the sick, the small saver, all those least able to protect themselves are the helpless prey of wicked inflation.”

According to public opinion polls of the 1950s, when annual inflation averaged less than 3%, Americans cited inflation as the most important domestic problem in eight of 10 years.

The Democrats tried to blame the big corporations for “administering” higher prices, but that charge fell on deaf ears. Demonizing labor won out. As the liberal economist John Kenneth Galbraith wrote in 1957, “The public will always attribute the whole of the price increases … to the presumed rapacity of the unions.”

The next big distributive battle over the high cost of living came in the 1970s. By then, though, the conversation was different. Republicans used inflation not so much to target organized labor, or only organized labor, as much as they blamed inflation on government spending for welfare programs that politicians said we could not afford.

Already in the 1960s, before there was full-blown inflation, the GOP was criticizing President Lyndon B. Johnson for spending too much on his Great Society, including his War on Poverty and fair housing.

That attack on Democrats as spending too much continued into the 1970s when inflation heated up. In the early days of the energy crisis, there was a push, for example, to cut busing for school integration as a luxury that required more fuel and only drove up the price of gas.

Richard Nixon, then in the Oval Office, slapped price controls on everything from beef to gas, fearing the impact on his reelection efforts. And after the Arab embargo in the fall of 1973, he knew that rising prices at the pump was a “gut issue” that could bring him down. Despite his GOP free-market roots, he embraced price controls.

Nixon was under pressure from Democrats who blamed prices at the pump on Big Oil and hauled leading oil executives before televised congressional hearings and accused them of earning “obscene profits.”

These attacks played well ​in the lead-up to the midterm elections of 1974 when Democrats expanded their control. Yes, there was the Watergate scandal. But polls showed that what people really cared about was the high cost of living. ​A Gallup Poll that July found 48% of those surveyed reported the high cost of living as the paramount problem; only 11% pointed to corruption in government and Watergate.

A generation of scholars and textbooks barely mentions this aspect of the 1974 midterms. Watergate seemed so much more pressing. But even today, as then, it is not clear that allegations of wrongdoing by a current or former President matter as much as rising prices.

You would think that the 1976 election would have been a clear victory for Jimmy Carter after Nixon’s resignation and President Gerald Ford’s pardon of the disgraced President. But it wasn’t. It was a close race, with Carter winning by less than 2% of the popular vote, because by then the first oil shock was over or had at least stabilized.

But high prices would come to define Carter’s presidency. Commentators are constantly reminding us that now is the worse inflation since the 1970s. But the 1970s were defined by stagflation, not just inflation, where rising prices were, to the surprise of the professional economists, accompanied by rising unemployment. That made the impact of inflation even worse.

And that made Carter’s reelection chances in 1980, when inflation ran at double digits, pretty grim. Most politicians in his party wanted him to fight unemployment. In the end, he opted for combatting inflation. And he ushered in what became known as the “Volcker shock,” appointing Paul Volcker to the Fed. Volcker pushed interest rates even higher than the rate of inflation. No one at the time was talking about trying to find a soft landing. Unemployment shot up.

Even if interest rate hikes promised to wipe out inflation, the public didn’t care, and Carter paid the price, losing in a landslide to Ronald Reagan.

Today, few candidates are running on a debate over what the Fed should or shouldn’t do. Since the Volcker shock, economists have established interest rate hikes as the proper policy response.

But Americans continue to fight over who is to blame for inflation. Is it Big Oil, is it Vladimir Putin’s price hike? Or is it Biden and the increase in government spending on his watch?

Certainly, it helps Democrats that gas prices, a huge driver of inflation, have come down. Nothing puts people on edge as much as rising gas prices. And the newly announced release from the Strategic Petroleum Reserve is a recognition of that reality.

But it remains unclear how the high cost of living is going to play out at the ballot box. The one thing that is clear is that these fights are just as much about who deserves what as they are about actual policy.