Public Sentiment, Political Responses, and Policy Debates
The cost-of-living crisis has not only economic dimensions but also profound political and social ramifications. As households feel the squeeze, public sentiment has shifted, putting pressure on governments and shaping political discourse. In the U.S., U.K., and EU, the crisis has vaulted to the top of the political agenda, prompting a range of responses – from emergency relief measures to heated debates over root causes and remedies.
Public sentiment has been characterized by concern, frustration, and in some cases anger. Polls through 2022–2023 consistently showed inflation and cost-of-living as the #1 concern for voters in many countries. In the U.S., consumer confidence (as measured by the University of Michigan index) plunged to historic lows in mid-2022 – the index hit 50 in June 2022, the lowest since tracking began in the 1970s. Although unemployment was low and jobs plentiful, people’s pessimism about their personal finances and the economy was driven by rising prices eroding their purchasing power. This was encapsulated in media reports of Americans skipping discretionary purchases, dipping into savings, or using credit cards more just to cover basics. In the U.K., as cited earlier, a survey found 77% of adults worried about the rising cost of living and half worrying nearly every day. Consumer confidence in Britain sank to levels not seen since the 2008 crisis or even the 1970s in some measures. European consumer sentiment also fell sharply – in the eurozone, confidence hit all-time lows around late 2022 according to European Commission surveys, reflecting the grim mood amid energy fears.
This public discontent created a political imperative: governments felt they must “do something” or face backlash. Indeed, the crisis has already claimed political scalps. In Britain, one could argue it was a factor in Boris Johnson’s downfall (Partygate aside, inflation was surging under his watch), and certainly central in the chaotic tenure of Liz Truss, whose misguided fiscal experiment during a cost-of-living crunch led to market panic and her quick exit. Rishi Sunak, coming in, made fighting inflation and restoring stability top priorities, though his popularity has been hampered by the continued economic pain. The opposition Labour Party has hammered the government for the rise in poverty and is proposing more state intervention (such as freezing energy prices, funded by windfall taxes). In short, the U.K. government’s approval took a hit as people felt not enough was done early enough to protect them.
Across Europe, high energy bills became a political flashpoint. In France, President Macron moved to cap energy price rises (the government bore costs), keenly aware that unchecked fuel prices had sparked the Yellow Vest protests in 2018. Despite these caps, there were large demonstrations in Prague, in some German cities, and elsewhere in late 2022 where protesters decried high prices and demanded government action or an end to sanctions on Russia (which they blamed for energy costs). Political parties on both the far-right and far-left tried to capitalize on the cost-of-living issue, blaming either EU climate policies or capitalist profiteering depending on their angle. For instance, Italy’s fall 2022 election saw right-wing parties come to power in part by tapping into public economic anxieties and promising to shield Italians from EU-driven austerity or high utility costs.
In the U.S., inflation became a key partisan battleground. Republicans dubbed it “Bidenflation,” blaming President Biden’s $1.9 trillion American Rescue Plan (stimulus of March 2021) for overheating the economy. They also pointed to high deficit spending and policies like canceling pipelines or pushing green energy as exacerbating fuel costs. Democrats, on the other hand, acknowledged inflation was a problem but argued it was largely global and driven by pandemic disruptions and corporate greed (some Democratic lawmakers even proposed an “Excess Profits Tax” on companies raising prices beyond cost increases). President Biden took some actions like large releases from the Strategic Petroleum Reserve (to bring gasoline prices down) and pushed through the Inflation Reduction Act in 2022 – a somewhat misnamed law since it was primarily about climate and healthcare investments, but it did have provisions like allowing Medicare to negotiate some drug prices which over time could lower healthcare costs for seniors. Biden has also repeatedly called on companies not to price-gouge and congratulated workers for seeking higher wages, trying to balance anti-inflation messaging with pro-labor messaging.
The public, for its part, often assigns blame to whoever is in power when their living standards fall. We saw Biden’s approval ratings dip in 2022 as inflation climbed, though Democrats fared better than expected in the midterms – likely because inflation, while top of mind, was somewhat offset by other issues and perhaps by relief that it was starting to ease by late 2022. Still, surveys showed many voters did not feel the economy was good, even if macro indicators like unemployment were excellent – a testament to the cost-of-living overshadowing other factors.
Policy responses have been multifaceted:
- Direct financial support: Many governments gave lump-sum payments or rebates. The U.K. did multiple rounds: a £150 council tax rebate, £400 energy bill credit to every household, cost-of-living payments targeted to low-income, pensioners and disabled (between £150 and £650). EU countries cut fuel taxes, gave energy “cheques” (e.g., France’s €100 energy check to low-income families), and subsidized public transport (Germany’s 9-euro monthly transit ticket in summer 2022). Some of these were temporary relief to blunt the immediate pain.
- Price controls and subsidies: Europe intervened heavily in energy markets – from capping gas and electricity retail prices (France, U.K., Spain) to subsidizing suppliers or consumers. While effective short-term, these are costly (the U.K.’s energy price guarantee was estimated at potentially £100+ billion if extended fully). Governments are now grappling with unwinding these in 2023–24 as prices come down from peaks but remain above historic norms.
- Monetary policy debates: Central banks’ rate hikes, though ostensibly independent decisions, have huge political implications. There’s been criticism from some quarters that central banks were slow to react (particularly ECB and BoE initially), and then fear they might overcorrect and cause recessions (critics like Senator Elizabeth Warren warned the Fed about causing “pain” to workers). Still, controlling inflation is largely entrusted to them. Japan and to a degree the ECB faced unique issues: the ECB has to balance very different inflation rates across member countries and did so by raising rates and creating new tools to avoid eurozone debt crises. The Bank of England, hiking into a recession risk, had to also briefly do emergency bond-buying during the Truss fiasco. These moves sometimes confused the public – e.g., why raise interest at a time people are already hurting? Central banks had to do public communication that short-term pain is needed to avoid longer-term entrenched inflation, a tough sell politically.
- Tax policy: The crisis sparked calls for windfall taxes on companies profiting excessively. The U.K. imposed one on oil & gas producers and later electricity generators. The EU also agreed on a temporary “solidarity contribution” (windfall levy) on fossil fuel firms and a cap on revenues of low-cost power generators, using proceeds to fund consumer relief. Conversely, some politicians proposed tax cuts as a solution – e.g., suspending gas taxes or cutting VAT on fuel/energy. These can reduce prices directly but also reduce revenue. The Truss government in the U.K. took it further with broad tax cuts (unfunded), which backfired disastrously as mentioned, showing that markets demand fiscal discipline especially amid inflation.
- Wage policies: Debates on wages have been heated. Unions argue that wage increases are a remedy, not cause, of the crisis – workers need raises to cope (and they point out corporate profits, not wages, have been driving inflation). Opponents fear a wage-price spiral if wages chase inflation. Governments took different tacks: some public sectors got sizeable raises (like in parts of Europe indexing or negotiating ~6-10% raises in sectors), others held firm which prompted strikes (as in U.K.). The U.K. did raise the minimum wage by 6.6% in April 2022 and further in 2023, which helped the lowest paid a bit. The U.S. had no federal minimum wage hike (stuck at $7.25), but many states and employers raised theirs due to labor shortages. The Roosevelt Institute and others advocate full employment and stronger labor rights so wages can rise, suggesting that empowering workers is part of the solution. This remains a contentious issue: whether to prioritize anti-inflation or pro-labor measures, or attempt balance.
Politically, the crisis has challenged incumbents to innovate or at least respond adequately. It has also fueled populist narratives. For the left, it’s about corporate greed, inequality, and the failure of neoliberal policies – e.g., pointing to how decades of privatization/austerity left people vulnerable (like lack of gas storage in U.K. was blamed on privatisation, and high rail fares on privatized rail, etc.). Left-wing politicians call for price controls, public ownership of utilities (the U.K.’s Labour floated re-nationalizing energy grid), and wealth taxes to fund aid. For the right, the narrative often focuses on government mismanagement – too much money printing, too much spending, or policies like net-zero climate measures seen as raising energy costs. Some right-wing populists also tap into anti-elite sentiment: the idea that elites imposing green taxes or ignoring ordinary people’s struggles caused this crisis. Both sides in their own way claim the crisis as vindication of their worldview (either “the rich are exploiting you” or “the government is failing you”).
We also see international tensions. Energy became a geopolitical bargaining chip – e.g., Russia cutting gas to Europe was clearly aimed at coercing Europe by creating a cost-of-living crisis to weaken public support for sanctions. To an extent it did create political divides (a minority in Europe argue to drop sanctions to get cheaper gas, though most governments held firm). Countries accused each other of “inflation exporting”: the U.S. Inflation Reduction Act caused some EU ire, seen as potentially driving industry away with subsidies. Meanwhile, some developing countries accused the U.S. Fed of causing recessions abroad with aggressive hikes that strengthened the dollar and raised their import costs and debt burdens.
Protest and unrest: So far, the crisis has led to notable labor strikes and some protests, but not severe unrest in the West. However, in poorer nations, there were riots and political upheaval related to inflation (e.g., Sri Lanka’s government fell amid skyrocketing prices and shortages; similar anger was seen in Peru, Pakistan and others). Historically, food and fuel price spikes can trigger revolutions or regime change (e.g., Arab Spring). Western democracies have more safety nets and channels for dissent (elections, etc.), but even there, sustained inflation can reshape political landscapes (Margaret Thatcher’s rise in 1979 was on the back of high inflation discrediting prior governments, for example).
In the U.K., one tangible development is a revival of trade union activity and public sympathy for it (to some extent) not seen since the 1980s. In winter 2022–23 dubbed the “new winter of discontent,” strikes hit railroads, postal service, NHS, education, and more. Public sentiment was mixed – frustration at disruptions but also significant empathy for workers’ plight. The government took a relatively hard line (limited pay offers, seeking to impose minimum service levels during strikes), which itself is a political stance. How that resolves may influence upcoming elections.
In the U.S., union drives at companies like Amazon, Starbucks, and the big Hollywood strikes (writers/actors) in 2023 had an undertone of cost-of-living issues; these were about paykeeping up in an era of rising profits and high living costs. The United Auto Workers strike in 2023 explicitly demanded inflation protection and big raises citing how auto companies’ profits had soared while workers’ real pay fell.
Summing up, political responses have been a balancing act: immediate relief versus long-term solutions, fighting inflation versus avoiding recession, and targeting aid versus broad measures. The crisis spurred some bold moves (e.g., energy price caps that were unthinkable free-market interventions a few years ago). It has also ignited policy debates about resilience: Should we invest in energy independence (renewables, storage) to avoid future price shocks? Should supply chains be reshored or diversified so we’re not so vulnerable to disruptions? How to reform housing policy so rents/home prices don’t become unbearable? And, how to ensure wages and social security keep up with the cost of living?
These debates likely will shape upcoming elections: In the U.K., the 2024 general election will heavily feature dueling cost-of-living plans. In the U.S., the 2024 presidential race will certainly cover inflation, with Republicans blaming Biden’s policies and Democrats claiming credit for inflation easing and unemployment low, yet acknowledging more to do on affordability (like childcare and prescription drugs, which Biden has emphasized). In the EU, managing the transition away from Russian energy without stoking long-term inflation (via investment in renewables and efficiency) is a key challenge.
Finally, public sentiment seems to demand structural change, not just handouts. There’s a sense that the crisis exposed flaws in the economic model – whether it be an overly financialized housing market, insufficient social safety nets, or over-reliance on global supply chains for basics. The sustained nature of the squeeze means voters might not be satisfied with piecemeal responses; they want assurance that their living standards will not continue eroding. This sets the stage for the concluding section: what solutions and reforms might address these issues in the longer term and prevent or mitigate future cost-of-living crises.