Michael Strain ponders the president’s options for battling inflation.
With prices rising faster than wages, workers are losing ground in the US. The consumer price index for April, released this week, shows an increase of 3.8 per cent over the year. The average wage grew by 3.6 per cent over the same period.
Americans are worried — including those the GOP needs to attract to the polls in November’s midterm elections. According to a new CNN poll, 55 per cent of Republicans and 81 per cent of independents say President Donald Trump’s policies have increased their cost of living.
To be sure, Trump is not blameless. But much of the culpability for inflation and high prices rests with the Federal Reserve and the previous government.
Simply put, it is the Fed’s responsibility to keep inflation low and stable, not Trump’s. …
… Of course, Trump is not wholly innocent. His tariffs have increased the cost of imported goods for households and businesses, pushing up measured CPI inflation while offering Americans little in return. The war in Iran led petrol prices to increase by 21.2 per cent in March, and Trump has not made a serious effort to persuade Americans of the war’s merits.
And his public messaging has been abysmal. Earlier this month, he said in a speech that the affordability issue was a “line of bullshit”. Last May, when asked about the effect of tariffs on consumer prices, he patronisingly argued that kids could “have two dolls instead of 30 dolls”. …
… When it comes to prices, Trump should do no harm. He should eliminate the tariffs on allied nations and watch the labour market with an eye towards increasing immigrant inflows if wage pressure starts to build. He should drop the suggested fuel tax holidays and “tariff dividends” for households — these unsound gimmicks would boost demand and add to price pressure.
In addition, he needs to direct his search for affordability solutions away from statist impulses, such as demands to cap credit card interest rates, that would exacerbate the problem.
