When voters cast their ballots for president next week, they will make a decision that will have a substantial impact on Ohio’s economy. According to the Pew Research Center, “the economy” is the top issue for voters this election, with 81% of registered voters saying it is very important to their vote in the presidential election this year. So let’s see what the implications of this election will be for the top economic issue for voters: inflation.
According to a late summer survey by the Pew Research Center, 74% of U.S. adults are very concerned about the price of food and consumer goods. The return of high levels of inflation for the first time in generations over the past few years has certainly had an impact on the public.
Vice President Harris has tried to blame rising prices on “price gouging” and corporate greed while Trump has focused on energy.
Harris’s proposals around a national ban on price gouging have caught skepticism from economists. A panel of preeminent economists recently rejected the assertion that price gouging was driving grocery prices.
The same panel also agreed tariffs, one of Donald Trump’s favorite policies, would increase consumer prices. The Peterson Institute for International Economics estimates Trump’s more aggressive tariff proposals would cost the average American household over $2,600 a year. Trump calls “tariff” “the most beautiful word in the dictionary. More beautiful than love, more beautiful than respect.” Your wallet disagrees.
Maybe the most important thing from the next president is what the chief executive will not do. Despite the rise in inflation to over 9% in the summer of 2022, action by the Federal Reserve pushed inflation down to 3% by the summer of 2023 and as of September of this year, it has dropped to 2.4%, its lowest rate in over three years.
Yes, tariffs will put upward pressure on inflation. But the difference between the presidential campaigns’ approach to the Federal Reserve might be even more important to the trajectory of prices. While Vice President Harris has made clear she supports continuing the tradition of independence of the Federal Reserve, Trump has repeatedly said he would want to exert power on the Federal Reserve as president.
While Trump was unable to use his political power to substantially threaten the political independence of the Federal Reserve in his first term, he was able to erode the political independence of and public confidence in a more central American institution: the U.S. Supreme Court. The Supreme Court bottomed out in 2022 at its lowest approval rating in generations partly because of its overtly political rulings, including rulings to shield the President from the reach of the law.
Turkey gives us a great example of what happens when politicians control monetary policy. President Recep Tayyip Erdogan has argued that low interest rates decrease inflation and put his hands on the levers of their national economy. This led to Turkish inflation reaching 85% in 2022, nearly 10 times as high as the U.S.’s generational peak that year. Inflation has only started to cool as Erdogan has taken his hands off the levers and allowed its central banks to increase interest rates.
If the U.S. has to contend with the twin problems of tariffs and loss of Federal Reserve independence, prices will increase again and could get worse than they were in 2022. Maybe it needs to get this bad for America to learn the dangers of authoritarian economic control. But while we learn that lesson, food will be harder to put on the table, rent will be more difficult to pay, and prices at the pump will increase. And state and local governments will be scrambling trying to figure out how to clean up the mess the federal government made.