Trump's Affordablility Factor

President Trump is attempting to clarify his stance on cost of living issues to win over voters who are worried about inflation. The messaging is centered around affordability, which Democrats took advantage of during the most recent election cycle. As I have always stated, the economy determines virtually all elections. That’s especially true when people perceive it to be a bad economy, even if it may not be. Let’s examine the economy.

Consumer prices in September increased at an annual rate of 3%, up from 2.3% in April when Trump initiated substantial tariff hikes. While higher than what today’s younger generations have mostly experienced, it’s still lower than long-term historical averages. The 1970’s and early 1980’s saw an average rate that was more than twice as high, including two consecutive years over 10%.

In an October paper, some economists stated inflation would have been drastically lower at 2.2% without the new tariffs. Drastically? Let’s consider an item costing $50. The difference between 2.2% and 3% inflation is the difference between $51.10 and $51.50 twelve months later. Yes, those pennies add up, but it’s not going to drastically change anyone’s life.

News outlets state that grocery prices continue to climb. Like always, some grocery prices are up, others are staying level or even lowering. Job gains have slowed, reportedly plunging 23% from a year ago. Yet I see “Help Wanted” signs seemingly everywhere. Business owners I know claim they can’t find quality workers. As a former business owner, I believe job stats to be somewhat disingenuous. Many younger people are choosing a less materialistic lifestyle and avoiding overtime or a second job, even though it could help with finances. Electricity, however, has emerged as a potential new worry, including by me.

Housing has definitely become an affordability problem. There are many reasons - from not building enough homes, to excess immigration under Biden, to building homes twice the size of homes built 50 years ago (despite having smaller families). Divorce rates even play a seldom-named reason. A split family results in demand for two households, not one. Increased safety and energy-efficient building codes further drive up building costs. Good news is, housing prices may be flattening.

Solutions exist, but few wish to implement them. Builders make little profit on a small home, and many neighbors and city commissioners don’t want smaller homes. Why? Money! Smaller homes may drive down nearby home values and cities end up with a smaller tax base. My guess is that if we cured the housing affordability situation, most other affordability issues would fade into the background.

One official stressed the challenge to overall affordability is to bring prices down while having wages increase. That sounds logical, but it’s not. The labor to mine/harvest, transport, manufacture, transport again, stock shelves, sell, etc., means that the price of everything is based mostly on multiple levels of wage costs. Lower prices and higher wages is an oxymoron. The solution is to end all the socialistic policies that we have implemented over the last five decades, which few understand only makes things more expensive, not less.

Source used: Associated Press