Explainer: Republicans blame Biden for inflation, but are they right?

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WASHINGTON, Nov 1 (Reuters) - While Democrats struggle to pass President Joe Biden's social and climate change agenda, Republicans have been pelting them with the repeated accusation that his policy initiatives are driving up inflation and making life costlier for Americans.

The U.S. consumer price index has risen at more than a 5% annual rate for four months in a row, while the economy suffers from labor and supply shortages caused by the COVID-19 pandemic. Treasury Secretary Janet Yellen predicted late last month that inflation would remain high into next year.

"There's no relief in sight. It's a direct result of flooding the country with money," Senate Minority Leader Mitch McConnell, the chamber's top Republican, told reporters last week. "The last thing we need to do is pile on with another massive, reckless tax and spending spree."

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McConnell spoke during a 13-minute news conference, during which he and his leadership team made at least two dozen references to inflation and rising costs or prices.

But are Republicans right to blame higher prices on Biden and the Democrats? Not entirely.

WHAT'S HAPPENING AROUND THE GLOBE?

The United States is hardly alone in enduring a bout of stiff inflation.

A headline measure tracked by the Organization for Economic Cooperation and Development shows inflation across the 38 member countries running at the highest level since 2008, lifted in no small part by the global surge in energy prices. Oil prices alone have quadrupled in the last 18 months as energy demand recovered with economies reopening from COVID-19 shutdowns.

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WHAT ABOUT STIMULUS SPENDING?

The main Republican argument against Biden is that his multitrillion-dollar legislative agenda makes inflation worse by flooding the economy with government spending, and promising much more.

His agenda includes the $1.9 trillion American Rescue Plan - the only plank so far enacted - and a yet-to-pass $1 trillion infrastructure bill. After that will come his "Build Back Better" social and climate spending package, which is anticipated to cost around $1.75 trillion.

But the annual inflation rates for dozens and dozens of goods routinely purchased by American households - including food - were already at their highest levels in a decade before Biden entered the White House early this year.

That's in large part because of the COVID-19 relief spending enacted under Republican Donald Trump's administration with overwhelming Republican support in the Senate. It exceeds what Democrats have allocated so far by roughly $1 trillion.

That money kept household balance sheets intact during the crisis and allowed consumers to keep spending despite double-digit unemployment. Moreover, household savings rocketed to unprecedented levels, providing tinder for more spending on activities like dining out and travel once those became widely available again.

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Republicans point to concerns raised by former Treasury Secretary Larry Summers, a Democrat who warned in a February Washington Post Op-Ed that Biden's American Rescue Plan could fuel inflation. But other economists, including Mark Zandi of Moody's Analytics, have since said that the Biden agenda is more likely to lift the economy's long-term growth prospects and ease inflation.

ARE VACCINE MANDATES DRIVING INFLATION?

Republicans claim Biden's COVID-19 vaccine mandates for most federal workers and for private businesses with more than 100 employees are exacerbating a national labor shortage at a time when inflationary pressures are affecting both wages and prices.

It is true that employment and workforce growth have slowed in recent months and employers are struggling to find workers - there were 10.4 million job openings in August, near a record high.

But the deadline for complying with the vaccine mandate is still more than a month off, and no firm data exists to validate this assertion, though a number of large companies have begun voicing concerns about their ability to retain and hire workers because of it. Others, like United Airlines, said they saw a surge in applications for employment after adopting vaccine mandates.

The mandates are aimed at protecting Americans from COVID-19, at a time when only 67% of the U.S. population has received at least one dose of a vaccine, according to the Reuters COVID-19 Vaccine Tracker.

Republicans allege the mandates are forcing workers who refuse to be vaccinated out of the labor force.

While thousands of workers across the United States do face potential job losses, vaccine resistance is strongest in Republican-led states where it has been largely reinforced by Republican officials.

WHAT DID ENHANCED UNEMPLOYMENT BENEFITS DO?

Republicans argue that "exorbitant handouts" from the federal government, including a $300 weekly federal pandemic unemployment benefit, also have contributed to the labor shortage and rise in inflation.

But those unemployment payments, which ended nationally in September, appear to have had limited impact on labor market participation. The mostly Republican-led states that blocked the payments added jobs in August at less than half the pace of other states that allowed the payments to flow.

WHAT EFFECT ARE SUPPLY-CHAIN WOES HAVING?

Republicans also want to blame Biden for the supply-chain shortage that has contributed to inflation.

But experts say the COVID-19 pandemic has disrupted every aspect of the global supply chain, from manufacturing and transportation to logistics, and not only in the United States but worldwide, at a time when the pandemic has also sparked a buying spree. The problem is partly due to a decades-old business strategy that aims to keep inventories lean.

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Reporting by David Morgan; Editing by Dan Burns, Scott Malone and Paul Simao

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