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It’s probably no exaggeration most of us felt a little poorer after the holiday season, many of us are still paying off our credits cards. The impact of high inflation over the past couple years continues to cause shock.
But with inflation now coming down, stocks outperforming expectations and unemployment at record low, how is it that so many American voters still feel negatively about the future of the country?
Affordability and inflation remain the No. 1 issue for American voters. It doesn’t matter whether voters are upper middle or working class, liberal or conservative. Even voters who are positive about their own financial situation note affordability and inflation as the most important issue. A massive 67% want to see their local candidate focus on affordability and inflation in the upcoming 2024 election (download Independent Center National Registered Voter Survey).
While the impact of COVID pandemic spending is easier to understand on its role in driving up inflation, both Democrats and Republicans are implementing policies and making promises in our current 2024 election campaign that will ensure affordability becomes an unavoidable crisis.
Inflation is front and center to any of today’s younger voting generations. Millennials and Gen Z will not remember the late 80s and early 90s when inflation and interest rates were far higher than today. During this period the economy suffered serval downturns and unemployment was much higher. But it seems our current leaders, most from that period, have forgotten the lessons learned.
In sector after sector the government got out of the business of picking winners and subsidizing favorite causes. Air travel, telecommunications and others were opened up to competition. Industrial policies forcing capital into protected and often unprofitable sectors were replaced with private sector decision making based on capital returns. It meant reducing the power of politicians to spend taxpayer dollars on what they saw fit and instead left consumers to make decisions best for their needs, and budget.
Today, its like back to the future. Once again we have both Democrat and Republican politicians increasingly using the power of government to disrupt economic decision making with short sighted and fundamentally flawed logic.
Trump’s tariffs are a perfect example. Everyone knows ultimately tariffs are paid by American consumers on the products they buy, not the companies from overseas. Domestic American business are impacted too, those that rely on imported goods or services are paying tariffs and must pass these higher costs on to consumers.
Both Biden and Trump are both upping the ante on how they will increasingly micro manage our economy. Both candidates almost brag about their plans to deploy government directed industrial strategies to address what they see as deficiencies in the US economy. The Inflation Reduction Act and Chips and Science Act demonstrate the enormous power of government to shape the economy. These programs have bid up the costs for everything, from staffing and supplies through to the additional subsidies local counties and states “offer up” to win new factories and investments.
A recent example was the concern over the purchase of US Steel by Nippon Steel for over $14B, almost double the most recent takeover offer by a rival US based company in 2023. The 10% tariff wall and other protectionist policies have driven the asset value up because the purchase means a foreign company can get inside the wall. This does not create a single new job, but it does add a lot of cost to the American consumer, who ultimately will pay in higher prices for every item that includes steel. That $14B has to be recouped in higher margins on everything we buy that includes steel.
There are countless examples but the point should be clear. Bad policy and politicians who can’t help themselves have once again delivered us an affordability crisis. Inflation now appears to be retreating to its target range, but these new costs are now baked into the system.
In the 2024 election cycle each candidate is trying to outbid one another with more government led spending, tariffs, regulations and initiatives favoring their special causes. This is the opposite of what we need.
