- Sep 13, 2002
- 96,122
- 197,339
- 113
It's super amusing to read the comments on these articles, because the WSJ readership and Fox viewers have a CONSIDERABLE overlap, and this factual reporting pisses off the Trumpanzees.
By
Greg Ip
Aug. 15, 2024 5:30 am ET
Donald Trump really needs to find a new supermarket.
In a speech in North Carolina on Wednesday, the former president complained that bacon costs four or five times as much as it did a few years ago. “I don’t order bacon anymore. It’s gotten too expensive.”
Clearly, whoever is selling him bacon is ripping him off: Bacon prices are up 18% nationally since President Biden took office.
Trump isn’t just getting gouged on bacon. He has claimed grocery prices are up 70% when they’re up 21% nationally since January 2021. He said last week that gasoline was $5 a gallon and rising when the average national price was $3.46 and falling.
Whatever the origin of Trump’s numbers, it’s plainly in his interest to keep the conversation on prices: If this election is a referendum on Biden’s inflation record, Trump will win in a landslide.
And yet inflation might no longer be the election winner Trump has counted on.
For one thing, it’s getting better. In July, consumer prices were up 2.9% from a year earlier, the lowest inflation rate since early 2021, and down sharply from 9.1% in mid-2022.
Markets have largely concluded that inflation is simply no longer an issue. Inflation-linked bonds project inflation in the coming year to be 2.2%, down from 2.6% just a month ago, according to Barclays.
Grocery prices are up about 21% nationally since January 2021. Photo: Tom Williams/Zuma Press
To be sure, inflation is still an issue with voters; polls show they think it’s getting worse. Trump pays no penalty for exaggerating prices because his claims resonate with how people feel. Moreover, one reason inflation looks less threatening is that unemployment recently rose, which, if it continues, is bad news for Vice President Kamala Harris, now the Democratic nominee.
But the retreat in inflation and softer jobs data have had one immediate, tangible benefit, both to consumers and Harris: lower interest rates. The Federal Reserve is almost certain to cut rates in September, and in anticipation, other borrowing rates have dropped. Mortgage rates have hit a 15-month low, so buying a house might be getting cheaper, though not by much.
In addition to the actual news on inflation improving, Harris is suffering less from public anger than Biden.
Public attitudes are driven less by prices rising more slowly (i.e., a lower inflation rate) than by their 19% cumulative change since Biden took office. Jared Bernstein, chairman of Biden’s Council of Economic Advisers, pointed out in a recent speech, “A central banker wants inflation to get back to target. A shopper wants his or her old price back.”
Harris has internalized this lesson. Her stump speech doesn’t mention falling inflation, but rather promises to reduce the cost of living and individual prices.
And a small, crucial slice of voters seems willing to give her a chance. Several surveys find voters trust her more on the economy than they trust Biden, though less than they trust Trump. In a poll of seven swing states, asked who they trusted more to bring the cost of living under control, 42% of respondents said Harris, while 48% said Trump—a small margin given economic pessimism, said Amy Walter, editor of the Cook Political Report, which sponsored the poll. “Harris is benefiting from the fact that she’s not getting the blame for a bad economy the way Biden was.”
If voters are willing to blame Biden for inflation in the past, they still want to know, what will Trump or Harris do about it in the future? Presidents can’t do much to influence economic growth or inflation, but are expected to try.
In her stump speech, Harris promises to “take on big corporations that engage in illegal price gouging, corporate landlords that unfairly raise rents on working families and…Big Pharma.” Friday, she will propose a federal ban on price-gouging in the food industry, her campaign said. It’s a natural message for a former prosecutor, but it won’t make a discernible difference. Companies certainly did profit from higher prices in recent years, but there’s little evidence it was illegal or fixable with federal action.
Trump has no concrete solution, either. In his view, inflation under Biden is due primarily to “a very stupid energy policy.” On Wednesday, he promised to slash energy costs, including electricity, by half in 12 to 18 months.
He didn’t explain how. Presidents have no direct control over electricity prices. Generation and transmission infrastructure take years to build. As for oil, he promises to “Drill, baby, drill.” But even if more onshore or offshore federal leases were offered for drilling, the increase in supply would be marginal and years away, said Jim Burkhard, head of oil research for S&P Global Commodity Insights. U.S. oil production is driven primarily by the global price, he said, which is why domestic output hit a record last year despite Biden favoring renewables over fossil fuels.
In the next two years, the primary drivers of global supply will be the Organization of the Petroleum Exporting Countries and Russia, which are boosting production because of
While the candidates’ policies aren’t likely to lower inflation, some might raise it. Specifically, economists think Trump’s plans to raise tariffs and deport migrants will put upward pressure on import costs and wages and thus inflation. Deutsche Bank estimates his proposed 60% tariff on imports from China and 10% from everywhere else would raise consumer prices by 1.4% to 1.7%. On Wednesday, Trump suggested he would go even further, hitting all imports with a tariff of “10% to 20%.”
Trump has also promised to extend all of his 2017 tax cuts, and end taxes on tips and Social Security benefits. His running mate, JD Vance, has proposed a $5,000 tax credit per child, more than double the current maximum credit. Even when offset by tariff revenue, that’s a lot of potential fiscal stimulus.
In a recession, stimulus might help. Otherwise, it would add to inflation pressure. Ordinarily, the Fed would lean against the inflationary threat of tariffs and bigger deficits with higher interest rates. But whereas past presidents have left the Fed alone—a tradition Harris said she would honor—Trump also wants a say in Fed rate decisions.
Fed independence doesn’t matter enough to voters to determine the outcome of the election. But it might determine the outcome on inflation—and that ought to matter to voters a lot.
Why Inflation Might Not Win the Election for Trump
Price pressures are receding, Harris carries less baggage than Biden, and Trump’s policies are more likely to raise than lower prices
By
Greg Ip
Aug. 15, 2024 5:30 am ET
Donald Trump really needs to find a new supermarket.
In a speech in North Carolina on Wednesday, the former president complained that bacon costs four or five times as much as it did a few years ago. “I don’t order bacon anymore. It’s gotten too expensive.”
Clearly, whoever is selling him bacon is ripping him off: Bacon prices are up 18% nationally since President Biden took office.
Trump isn’t just getting gouged on bacon. He has claimed grocery prices are up 70% when they’re up 21% nationally since January 2021. He said last week that gasoline was $5 a gallon and rising when the average national price was $3.46 and falling.
Whatever the origin of Trump’s numbers, it’s plainly in his interest to keep the conversation on prices: If this election is a referendum on Biden’s inflation record, Trump will win in a landslide.
And yet inflation might no longer be the election winner Trump has counted on.
For one thing, it’s getting better. In July, consumer prices were up 2.9% from a year earlier, the lowest inflation rate since early 2021, and down sharply from 9.1% in mid-2022.
Markets have largely concluded that inflation is simply no longer an issue. Inflation-linked bonds project inflation in the coming year to be 2.2%, down from 2.6% just a month ago, according to Barclays.
To be sure, inflation is still an issue with voters; polls show they think it’s getting worse. Trump pays no penalty for exaggerating prices because his claims resonate with how people feel. Moreover, one reason inflation looks less threatening is that unemployment recently rose, which, if it continues, is bad news for Vice President Kamala Harris, now the Democratic nominee.
But the retreat in inflation and softer jobs data have had one immediate, tangible benefit, both to consumers and Harris: lower interest rates. The Federal Reserve is almost certain to cut rates in September, and in anticipation, other borrowing rates have dropped. Mortgage rates have hit a 15-month low, so buying a house might be getting cheaper, though not by much.
In addition to the actual news on inflation improving, Harris is suffering less from public anger than Biden.
Public attitudes are driven less by prices rising more slowly (i.e., a lower inflation rate) than by their 19% cumulative change since Biden took office. Jared Bernstein, chairman of Biden’s Council of Economic Advisers, pointed out in a recent speech, “A central banker wants inflation to get back to target. A shopper wants his or her old price back.”
Harris has internalized this lesson. Her stump speech doesn’t mention falling inflation, but rather promises to reduce the cost of living and individual prices.
And a small, crucial slice of voters seems willing to give her a chance. Several surveys find voters trust her more on the economy than they trust Biden, though less than they trust Trump. In a poll of seven swing states, asked who they trusted more to bring the cost of living under control, 42% of respondents said Harris, while 48% said Trump—a small margin given economic pessimism, said Amy Walter, editor of the Cook Political Report, which sponsored the poll. “Harris is benefiting from the fact that she’s not getting the blame for a bad economy the way Biden was.”
If voters are willing to blame Biden for inflation in the past, they still want to know, what will Trump or Harris do about it in the future? Presidents can’t do much to influence economic growth or inflation, but are expected to try.
In her stump speech, Harris promises to “take on big corporations that engage in illegal price gouging, corporate landlords that unfairly raise rents on working families and…Big Pharma.” Friday, she will propose a federal ban on price-gouging in the food industry, her campaign said. It’s a natural message for a former prosecutor, but it won’t make a discernible difference. Companies certainly did profit from higher prices in recent years, but there’s little evidence it was illegal or fixable with federal action.
Trump has no concrete solution, either. In his view, inflation under Biden is due primarily to “a very stupid energy policy.” On Wednesday, he promised to slash energy costs, including electricity, by half in 12 to 18 months.
He didn’t explain how. Presidents have no direct control over electricity prices. Generation and transmission infrastructure take years to build. As for oil, he promises to “Drill, baby, drill.” But even if more onshore or offshore federal leases were offered for drilling, the increase in supply would be marginal and years away, said Jim Burkhard, head of oil research for S&P Global Commodity Insights. U.S. oil production is driven primarily by the global price, he said, which is why domestic output hit a record last year despite Biden favoring renewables over fossil fuels.
In the next two years, the primary drivers of global supply will be the Organization of the Petroleum Exporting Countries and Russia, which are boosting production because of
While the candidates’ policies aren’t likely to lower inflation, some might raise it. Specifically, economists think Trump’s plans to raise tariffs and deport migrants will put upward pressure on import costs and wages and thus inflation. Deutsche Bank estimates his proposed 60% tariff on imports from China and 10% from everywhere else would raise consumer prices by 1.4% to 1.7%. On Wednesday, Trump suggested he would go even further, hitting all imports with a tariff of “10% to 20%.”
Trump has also promised to extend all of his 2017 tax cuts, and end taxes on tips and Social Security benefits. His running mate, JD Vance, has proposed a $5,000 tax credit per child, more than double the current maximum credit. Even when offset by tariff revenue, that’s a lot of potential fiscal stimulus.
In a recession, stimulus might help. Otherwise, it would add to inflation pressure. Ordinarily, the Fed would lean against the inflationary threat of tariffs and bigger deficits with higher interest rates. But whereas past presidents have left the Fed alone—a tradition Harris said she would honor—Trump also wants a say in Fed rate decisions.
Fed independence doesn’t matter enough to voters to determine the outcome of the election. But it might determine the outcome on inflation—and that ought to matter to voters a lot.
