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      If You Must Point Fingers on Inflation, Here’s Where to Point Them

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      As the midterm elections draw nearer, a central conservative narrative is coming into sharp focus: President Joe Biden and the Democratic-controlled Congress have a made a mess of the American economy. Republicans see pure political gold in this year’s slow-motion stock market crash, which seems to be accelerating at the perfect time for a party seeking to regain control of Congress in the fall.The National Republican Congressional Committee in a tweet last month quipped that the Democratic House agenda includes a “tanking stock market.” Conservatives have been highlighting a video clip from 2020 when then-president Donald Trump warned about a Joe Biden presidency: “If he’s elected, the stock market will crash.” Right wing pundit Sean Hannity’s blog featured the clip under the headline: “TRUMP WAS RIGHT.”But the narrative pinning blame for the economy’s woes squarely on Democrats’ shoulders elides the true culprit: the Federal Reserve. The financial earthquakes of 2022 trace their origin to underground pressures the Fed has been steadily creating for a over a decade.It started back in 2010, when the Fed embarked on the unprecedented and experimental path of using its power to create money as a primary engine of American economic growth. To put it simply, the Fed created years of super-easy money, with short-term interest rates held near zero while it pumped trillions of dollars into the banking system. One way to understand the scale of these programs is to measure the size of the Fed’s balance sheet. The balance sheet was about $900 billion in mid-2008, before the financial market crash. It rose to $4.5 trillion in 2015 and is just short of $9 trillion today.All of this easy money had a distinct impact on our financial system — it incentivized investors to push their money into ever riskier bets. Wall Street-types coined a term for this effect: “search for yield.” What that means is the Fed pushed a lot of money into a system that was searching for assets to buy that might, in return, provide a decent profit, or yield. So money poured into relatively risky assets like technology stocks, corporate junk debt, commercial real estate bonds, and even cryptocurrencies and nonfungible tokens, known as NFTs. This drove the prices of those risky assets higher, drawing in yet more investment.The Fed has steadily inflated stock prices over the last decade by keeping interest rates extremely low and buying up bonds — through a program called quantitative easing — which has the effect of pushing new cash into asset markets and driving up prices. The Fed then supercharged those stock prices after the pandemic meltdown of 2020 by pumping trillions into the banking system. It was the Fed that primarily dropped the ball on addressing inflation in 2021, missing the opportunity to act quickly and effectively as the Fed chairman, Jerome Powell, reassured the public that inflation was likely to be merely transitory even as it gained steam. And it’s the Fed that is playing a frantic game of financial catch-up, hiking rates quickly and precipitating a wrenching market correction.So, now the bill is coming due. Unexpectedly high inflation — running at the hottest levels in four decades — is forcing the Fed to do what it has avoided doing for years: tighten the money supply quickly and forcefully. Last month, the Fed raised short-term rates by half-a-percentage point, the single largest rate hike since 2000. The aggressiveness of the move signaled that the Fed could take similarly dramatic measures again this year.A sobering realization is now unfolding on Wall Street. The decade of super-easy money is likely over. Because of inflation’s impact, the Fed likely won’t be able to turn on the money spigots at will if asset prices collapse. This is the driving force behind falling stock prices, and why the end of the collapse is probably not yet in sight. The reality of a higher-interest-rate world is working its way through the corridors of Wall Street and will likely topple more fragile structures before it’s all over.After the stock and bond markets adjust downward, for example, investors must evaluate the true value of other fragile towers of risky assets, like corporate junk debt. The enormous market for corporate debt began to collapse in 2020, but the Fed stopped the carnage by directly bailing out junk debt for the first time. This didn’t just save the corporate debt market, but added fuel to it, helping since 2021 to inflate bond prices. Now those bonds will have to be re-priced in light of higher interest rates, and history indicates that their prices will not go up.And while the Fed is a prime driver of this year’s volatility, the central bank continues to evade public accountability for it.Just last month, for instance, the Senate confirmed Mr. Powell to serve another four-year term as Fed chairman. The vote — more than four to one in favor — reflects the amazingly high level of bipartisan support that Mr. Powell enjoys. The president, at a White House meeting in May, presented Mr. Powell as an ally in the fight against inflation rather than the culprit for much of this year’s financial market volatility. “My plan is to address inflation. It starts with a simple proposition: Respect the Fed and respect the Fed’s independence,” the president said.This leaves the field open for the Republican Party to pin the blame for Wall Street’s woes on the Democratic Party’s inaction. As Jim Jordan, the Republican congressman from Ohio, phrased it on Twitter recently, “Your 401k misses President Trump.” This almost certainly presages a Republican line of attack over the summer and fall. It won’t matter that this rhetoric is the opposite of Mr. Trump’s back in 2018 and 2019, when the Fed was tightening and causing markets to teeter. Back then, Mr. Trump attacked Mr. Powell on Twitter and pressured the Fed chairman to cut interest rates even though the economy was growing. (The Fed complied in the summer of 2019.) But things are different now. Mr. Biden is in office, and the Fed’s tightening paves a clear pathway for the Republican Party to claim majorities in the House and Senate.Republicans have also honed in on Mr. Biden’s $1.9 trillion American Rescue Plan, meant to mitigate the impact of the Covid-19 pandemic, as a cause for runaway inflation. Treasury Secretary Janet Yellen rejected that, noting in testimony before members of Congress: “We’re seeing high inflation in almost all of the developed countries around the world. And they have very different fiscal policies. So it can’t be the case that the bulk of the inflation that we’re experiencing reflects the impact” of the American Rescue Plan.Democrats would be wise to point to the source of the problem: a decade of easy money policies at the Fed, not from anything done at the White House or in Congress over the past year and a half.The real tragedy is that this fall’s election might reinforce the very dynamics that created the problem in the first place. During the 2010s, Congress fell into a state of dysfunction and paralysis at the very moment when its economic policymaking power was needed most. It should be viewed as no coincidence that the Fed announced that it would intensify its experiments in quantitative easing on Nov. 3, 2010, the day after members of the Tea Party movement were swept into power in the House. The Fed was seen as the only federal agency equipped to forcefully drive economic growth as Congress relegated itself to the sidelines.With prices for gas, food and other goods still on the rise and the stock market in a state of flux, there may still be considerable pain ahead for consumers. But Americans shouldn’t fall for simplistic rhetoric that blames this all on Mr. Biden. More than a decade of monetary policy brought us to this moment, not 17 months of Democratic control in Washington. Voters should be clear-eyed about the cause of this economic chaos, and vote for the party they think can best lead us out of it.Christopher Leonard (@CLeonardNews) is the author, most recently, of “The Lords of Easy Money: How the Federal Reserve Broke the American Economy” and executive director of the Watchdog Writers Group at the Missouri School of Journalism.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram. More

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      High California Gas Prices Rattle Democrats Ahead of Midterms

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      SANTA ANA, Calif. — Orange County, Calif., symbolized Republican struggles in America’s diverse and highly educated suburbs during Donald J. Trump’s presidency, as a backlash to Mr. Trump transformed center-right strongholds into increasingly Democratic territory.But at a Chevron station in Santa Ana near John Wayne Airport on Friday afternoon, the anger was aimed at President Biden and his party, as Californians grappled with gas prices registering that day at $6.59 a gallon.“I’m really unhappy,” Carmen Vega, 47, of Anaheim, said, adding that she voted for Mr. Biden but was now considering backing Republicans in the midterm elections. “The economy sucks right now, everything’s too expensive.”And as Simona Sabo, 38, of Irvine, waxed nostalgic for Mr. Trump while filling up her S.U.V. — “What I liked was that gas prices weren’t this high” — another woman poked her head around the pump and offered a silent thumbs up before driving away.Five months before the midterm elections, Democrats are straining to defend their narrow House majority in a brutal political environment shaped by high inflation, Mr. Biden’s low approval ratings and a strong sense among many Americans that the country is on the wrong track. But they have held out hope that a handful of California congressional contests will emerge as bright spots, thanks to the redistricting process that made some seats more hospitable to Democrats, and the importance of issues including abortion rights and gun control to many coastal voters.A station in Los Angeles last week with even higher prices.Zeng Hui/Xinhua via Getty ImagesYet in California, home to the highest average price for regular gasoline in the nation — $6.326 on Sunday, according to the motor club AAA, compared with the nation’s average of $4.848 — anger over the cost of living is threatening Democrats’ ambitions. (California gas prices are typically the highest in the nation, owing in part to state taxes and regulations on emissions that require a more expensive blend of gasoline, but recent numbers have been eye-popping.)On the cusp of Tuesday’s primary elections that will determine California’s general election matchups, there are signs that the cost of living is overshadowing virtually every other issue in some of the state’s battleground areas, according to elected officials, party strategists and polling.“They’re beyond furious — it’s called desperation,” said Representative Lou Correa, a Democrat from Santa Ana, whose district is considered safely Democratic but neighbors more competitive Orange County seats. “I don’t hear anything about the other national issues we’re focusing on in Washington. The thing I hear about is gasoline. What are you going to do to bring down the gas prices?”An ABC News/Ipsos poll released Sunday found that most Americans called the economy, inflation and rising gas prices the most important issues in determining their midterm votes. Just 28 percent of those surveyed approved of Mr. Biden’s handling of inflation, and 27 percent approved of his handling of gas prices.Understand the 2022 Midterm Elections So FarAfter key races in Georgia, Pennsylvania and other states, here’s what we’ve learned.Trump’s Invincibility in Doubt: With many of Donald J. Trump’s endorsed candidates failing to win, some Republicans see an opening for a post-Trump candidate in 2024.G.O.P. Governors Emboldened: Many Republican governors are in strong political shape. And some are openly opposing Mr. Trump.Voter Fraud Claims Fade: Republicans have been accepting their primary victories with little concern about the voter fraud they once falsely claimed caused Mr. Trump’s 2020 loss.The Politics of Guns: Republicans have been far more likely than Democrats to use messaging about guns to galvanize their base in the midterms. Here’s why.“The problem for the Democrats here will be that all of the contributing economic factors, particularly inflation, that’s hurting them nationally is on steroids in California,” said Rob Stutzman, a veteran California Republican strategist who is assisting some independent statewide candidates this year. “Seats that, when the maps got drawn, that they didn’t think would be competitive very well could be,” he added.The contours of those House races will come into clearer focus after Tuesday’s primaries, which have so far appeared to be low-turnout affairs. In California primaries, the top two vote-getters, regardless of party, then move on to the general election.The races against Representatives David Valadao and Mike Garcia, two Republicans, are expected to be highly competitive in general elections, given the Democratic tilt of both their new districts.Mr. Valadao, of the Central Valley, is one of 10 Republicans who voted to impeach Mr. Trump after the Jan. 6 Capitol riot, and he also faces primary challenges.Mr. Garcia, of Santa Clarita, who won his last election by just 333 votes, voted against certifying the results of the 2020 election. Democrats are locked in a primary to challenge him.There are also primary contests for a newly redrawn open seat in California’s 13th Congressional District near Fresno, which leans Democratic, according to the Cook Political Report, though the race may well be highly competitive.Several Republican primary contests may determine how close a number of Southern California seats become. National Republicans see a chance to defeat Representative Mike Levin, a Democrat, but there is also a competitive primary to challenge him.There has also been something of a Republican rescue mission for Representative Young Kim. Her primary contest this year grew unexpectedly competitive, and her newly redrawn district would become far more tightly contested in November should she lose.Two other high-profile House races are unfolding in Orange County, a place once strongly associated with Ronald Reagan and Richard Nixon, staunchly conservative former presidents, but now a prominent political battleground. Representative Michelle Steel, who like Ms. Kim is a Korean American Republican who flipped a seat in 2020, is running in a new, heavily Asian American district in what is expected to be a close race against Jay Chen, a small-business owner and lieutenant commander in the U.S. Navy Reserve. The newly drawn district somewhat favors Democrats.Representative Katie Porter speaking at an event against gun violence on Saturday in Seal Beach, Calif.Jenna Schoenefeld for The New York TimesAnd Representative Katie Porter, a Democrat with a national platform and a huge war chest, is running in a redrawn seat that is roughly evenly politically divided.She and many other Democrats argue that their party is trying to bring down gas prices — which have spiked for reasons including Russia’s invasion of Ukraine — while charging that Republicans embrace the issue as a political cudgel. And certainly, there is still time for gas prices and other costs to come down before the midterms, amid other positive economic indicators, and for the political environment to improve for Democrats in competitive races.“My minivan is almost out of gas today and I thought, you know what, I’m not in the mood to fill it up today. Right? It’s frustrating,” Ms. Porter said, arguing that Democrats grasp voters’ pain on this issue. “There is a solution to this, and it starts by being willing to stand up to corporate abuse.”Representative Michelle Steel with Irene Schweitzer, 99, of Anaheim, on Saturday at a campaign event in Buena Park, Calif.Jenna Schoenefeld for The New York TimesRepublicans argue that Democrats have pursued a range of inflationary measures, and some are pushing for practices like more drilling.Understand the 2022 Midterm ElectionsCard 1 of 6Why are these midterms so important? More

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      Republicans Wrongly Blame Biden for Rising Gas Prices

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      They have pointed to the Biden administration’s policies on the Keystone XL pipeline and certain oil and gas leases, which have had little impact on prices.WASHINGTON — As gas prices hit a high this week, top Republican lawmakers took to the airwaves and the floors of Congress with misleading claims that pinned the blame on President Biden and his energy policies.Mr. Biden warned that his ban on imports of Russian oil, gas and coal, announced on Tuesday as a response to Russia’s invasion of Ukraine, would cause gas prices to rise further. High costs are expected to last as long as the confrontation does.While Republican lawmakers supported the ban, they asserted that the pain at the pump long preceded the war in Ukraine. Gas price hikes, they said, were the result of Mr. Biden’s cancellation of the Keystone XL pipeline, the temporary halt on new drilling leases on public lands and the surrendering of “energy independence” — all incorrect assertions.Here’s a fact check of their claims.What Was Said“This administration wants to ramp up energy imports from Iran and Venezuela. That is the world’s largest state sponsor of terror and a thuggish South America dictator, respectively. They would rather buy from these people than buy from Texas, Alaska and Pennsylvania.”— Senator Mitch McConnell, Republican of Kentucky and the minority leader, in a speech on Tuesday“Democrats want to blame surging prices on Russia. But the truth is, their out-of-touch policies are why we are here in the first place. Remember what happened on Day 1 with one-party rule? The president canceled the Keystone pipeline, and then he stopped new oil and gas leases on federal lands and waters.”— Representative Kevin McCarthy, Republican of California and the minority leader, in a speech on Tuesday“In the four years of the Trump-Pence administration, we achieved energy independence for the first time in 70 years. We were a net exporter of energy. But from very early on, with killing the Keystone pipeline, taking federal lands off the list for exploration, sidelining leases for oil and natural gas — once again, before Ukraine ever happened, we saw rising gasoline prices.”— Former Vice President Mike Pence in an interview on Fox Business on TuesdayThese claims are misleading. The primary reason for rising gas prices over the past year is the coronavirus pandemic and its disruptions to global supply and demand.“Covid changed the game, not President Biden,” said Patrick De Haan, the head of petroleum analysis for GasBuddy, which tracks gasoline prices. “U.S. oil production fell in the last eight months of President Trump’s tenure. Is that his fault? No.”“The pandemic brought us to our knees,” Mr. De Haan added.In the early months of 2020, when the virus took hold, demand for oil dried up and prices plummeted, with the benchmark price for crude oil in the United States falling to negative $37.63 that April. In response, producers in the United States and around the world began decreasing output.As pandemic restrictions loosened worldwide and economies recovered, demand outpaced supply. That was “mostly attributable” to the decision by OPEC Plus, an alliance of oil-producing countries that controls about half the world’s supply, to limit increases in production, according to the U.S. Energy Information Administration. Domestic production also remains below prepandemic levels, as capital spending declined and investors remained reluctant to provide financing to the oil industry.Russia’s invasion of Ukraine has only compounded the issues.“When you throw a war on top of this, this is possibly the worst escalation you can have of this,” said Abhiram Rajendran, the head of oil market research at Energy Intelligence, an energy information company. “You’re literally pouring gasoline on general inflationary pressure.”These factors are largely out of Mr. Biden’s control, experts agreed, though they said he had not exactly sent positive signals to the oil and gas industry and its investors by vowing to reduce emissions and fossil fuel reliance.Mr. De Haan said the Biden administration was “clearly less friendly” to the industry, which may have indirectly affected investor attitudes. But overall, he said, that stance has played a “very, very small role pushing gas prices up.”President Biden announced a ban on imports of Russian oil in response to the country’s invasion of Ukraine.Tom Brenner for The New York TimesMr. Rajendran said the Biden administration had emphasized climate change issues while paying lip service to energy security.“There has been a pretty stark miscalculation of the amount of supply we would need to keep energy prices at affordable levels,” he said. “It was taken for granted. There was too much focus on the energy transition.”But presidents, Mr. Rajendran said, “have very little impact on short-term supply.”“The key relationship to watch is between companies and investors,” he said.It is true that the Biden administration is in talks with Venezuela and Iran over their oil supplies. But the administration is also urging American companies to ramp up production — to the dismay of climate change activists and contrary to Republican lawmakers’ suggestions that the White House is intent on handcuffing domestic producers.Speaking before the National Petroleum Council in December, Jennifer M. Granholm, the energy secretary, told oil companies to “please take advantage of the leases that you have, hire workers, get your rig count up.”Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More