Republicans Highlight Inflation in Effort to Thwart Biden’s Midterm Economic Case

WASHINGTON—President Biden is touting an economic boom he says will boost Americans as the nation exits the Covid-19 pandemic. But Republicans have pointed to the accompanying surge in inflation to hammer the president’s party over higher prices for used cars, apparel and more.

A burst of growth in the first quarter of this year put the U.S. economic output within 1% of its pre-pandemic peak, reached in late 2019. But inflation also is at the highest point in 13 years, and Federal Reserve officials are weighing when to pull back support for the economy. Economists predict inflation will remain elevated for several years, though they expect it to come down some from current levels.

The White House and many economists say the price increases are due to a number of factors, including pandemic-related supply bottlenecks and shortages and a rise in demand after a year at home. Administration officials point to data showing that the labor market is recovering and consumer confidence is rising and contend that a repeat of the runaway inflation of the 1970s isn’t in the cards, saying the current levels are temporary.

Treasury Secretary Janet Yellen told a House committee recently: “I came of age and studied economics in the 1970s, and I remember what that terrible period was like and no one wants to see that happen again.”

Plentiful stimulus funding passed by Congress for pandemic relief, including $1.9 trillion early in Mr. Biden’s term, also is contributing to higher demand and prices, many economists say, prompting Republicans to contend that Mr. Biden’s subsequent legislative proposals—trillions more in infrastructure and antipoverty spending—will exacerbate inflation and overheat the economy.

“It is going to be an issue with the midterms because it’s not going to end. They are continuing to flood the economy with more cash,” said Rep. Tom Emmer (R., Minn.), chairman of the National Republican Congressional Committee, which supports House GOP candidates.

The U.S. inflation rate reached a 13-year high recently, triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ’s Jon Hilsenrath looks at what consumers can expect next.

Republicans are hoping to neutralize Democrats’ arguments about the otherwise strong economic recovery ahead of the 2022 midterm elections. Control of Congress is expected to be up for grabs given that Democrats have a slim majority in the House and there is a 50-50 tie in the Senate. Midterms frequently favor the party that is out of power.

Ahead of the July 4 weekend, the NRCC launched an ad campaign targeting 11 Democratic members of Congress that they see as vulnerable in the midterms. “Democrats’ harmful economic policies are making everyday goods cost more,” the ads said.

Democratic Rep. Vicente Gonzalez of Texas: ‘People will see that they’re living better today than they were two years ago.’

Photo: Brenda Bazan for The Wall Street Journal

Rep. Vicente Gonzalez, (D., Texas), who was among those targeted, stressed that the economy was doing well, with unemployment down in May from the prior month. “At the end of the day, the American people will see that they’re living better today than they were two years ago, and that’s what’s going to motivate them at their next election,” he said.

In a statement, Rep. Sean Patrick Maloney, (D., N.Y.), who chairs the Democratic Congressional Campaign Committee, said that Republicans voted against Mr. Biden’s Covid-19 aid package, which he credited with helping the economic rebound, and that “now they are desperate to change the subject.”

Some Democrats have made clear they are watching the rise in prices. Sen. Joe Manchin (D., W.Va.) said Wednesday, as he discussed a plan from Senate Democrats to spend roughly $3.5 trillion on antipoverty measures, that “inflation should be everyone’s concern.”

Administration officials have said higher gasoline prices—which are up because of higher crude-oil prices and growing demand as workers return to the office—are part of a historical trend of increases in the summer. Before the July 4 holiday, the White House touted lower prices for cookout staples such as pork and beans and vanilla ice cream.

Mr. Biden recently said of inflation: “The overwhelming consensus is it’s going to pop up a little bit and then go back down.”

The Labor Department said last month’s consumer-price index increased 5.4% from a year ago, the highest 12-month rate since August 2008. The index measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles.

The White House said car prices have been affected by global pressures such as a semiconductor shortage.

Photo: David Paul Morris/Bloomberg News

Republican leaders highlighted the new numbers Tuesday. House Minority Leader Kevin McCarthy, (R., Calif.) tweeted: “Inflation is running rampant due in part to out-of-control spending from President Biden and Speaker Pelosi.” Republican National Committee Chairwoman Ronna McDaniel wrote: “On Biden’s watch, the hidden tax of rising prices keeps going up.” Senate Minority Leader Mitch McConnell said American families were feeling higher prices “everywhere, from the supermarket to the gas pump to the housing to the used car lot and beyond.”

The White House said a large portion of the latest increase was due to a narrow sector of goods, particularly cars, which they stressed were affected by global pressures such as a semiconductor shortage.

David Kamin, a deputy director of the White House National Economic Council, said in an interview that the improving economy shows that the president’s efforts are working. “Our plan was to make sure Americans’ income didn’t fall, that they got the support they needed to get them through the pandemic,” he said, a reference to stimulus checks and other aid to families and support for businesses.

A recent poll from Monmouth University found that 71% of respondents expressed concern that Mr. Biden’s spending proposals could drive inflation, compared with 28% who said they weren’t too concerned or not at all worried.

But they appear not to see the Biden administration’s spending proposals as a problem. The poll of 810 adults also showed that a majority supported his proposals to spend trillions on traditional infrastructure projects, like bridges and roads, and for antipoverty measures, like child care, education and paid leave.

The White House reached a deal in June with a bipartisan group of senators on a $1 trillion infrastructure plan. That deal must now win approval in the narrowly divided Congress. Democrats on the Senate Budget Committee have agreed to roughly $3.5 trillion in spending for a broad healthcare and antipoverty plan that they hope to pass on a party-line vote, using a special process in the Senate to get around likely Republican opposition. GOP lawmakers have criticized that agreement; Sen. Steve Daines (R., Mont.) called it “a terrible plan for taxpayers” in light of the inflation data this week.

SHARE YOUR THOUGHTS

How concerned are you about inflation? Join the conversation below.

Former Treasury Secretary Larry Summers is among the economists who have warned that a burst of federal spending this year could prompt unwelcome inflation. He was at the White House on Tuesday to meet with Brian Deese, head of the White House’s National Economic Council, and Cecilia Rouse, chairwoman of the Council of Economic Advisers, a White House official said, adding that they spoke about the infrastructure package and the president’s economic agenda at what was described as a long scheduled meeting.

Mr. Summers said Wednesday that the available data raised concerns about inflation. He said he generally supports Mr. Biden’s proposed infrastructure spending, however, saying it was “longer term, has positive supply elements and in the president’s proposal will be paid for with tax increases or the returns on investment.”

Voters said in interviews that they have seen the impact of higher prices on their wallets. Some said they weren’t focused on the 2022 midterms yet, and their views of Mr. Biden’s handling of the economy generally aligned with their 2020 election choices.

Lauri Deal, 64 years old, a retiree from Culpeper, Va., who supported Mr. Biden in 2020, said that she has seen prices go up for food, gasoline and other items and has to “go to several stores to get the best prices.” She said Mr. Biden is doing an excellent job, and she supported his push for infrastructure spending: “A lot of this should have been done years ago.”

Bonnie Kiger, 80, of Forest, Va., who backed former President Donald Trump, said she blames Mr. Biden for the rise in inflation. On prices, she said: “Anytime you need anything, most of them are too high.”

Write to Catherine Lucey at catherine.lucey@wsj.com

Corrections & Amplifications
Rep. Vicente Gonzalez is a Democrat from Texas. An earlier version of this article misspelled his first name. (Corrected on July 15)

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8