High Inflation Testing Economic Promises as U.S. Election Nears
Kamala Harris (L) and Michelle Obama (R), Oct. 2024. X/ @DreadNobody
October 31, 2024 Hour: 9:17 am
Nearly 40 percent of American voters rank prices, inflation, jobs and the economy as the most critical issues in this election.
The U.S. government has often touted its success in controlling inflation in recent years, even though many Americans still feel the pinch of rising prices and high living costs. An American family of four now has to spend roughly US$2,500 a year more on groceries than in 2022, with house prices up by nearly a quarter and real wages in decline.
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As the 2024 U.S. presidential election approaches, inflation has emerged as a central concern for voters. A recent poll jointly conducted by The Economist and YouGov revealed that nearly 40 percent of American voters rank prices, inflation, jobs and the economy as the most critical issues in this election.
To gain more votes, Democratic and Republican presidential candidates have made sweeping promises to tackle inflation. However, many experts remain skeptical about their efficacy and sustainability, citing vague funding plans and the potential strain on a debt-reliant federal government.
EFFICACY IN QUESTION
To address soaring prices, one of the major policies proposed by Democratic candidate Kamala Harris is to impose a federal ban on “corporate price-gouging” on food and groceries. Economists, however, argue that the fundamental reason for soaring prices is limited supply rather than corporate price hikes.
Harvard economics professor Kenneth Rogoff told CNN he did not think corporate price gouging had “all that much to do” with inflation. Similarly, Bloomberg research indicated that U.S. manufacturers have raised prices primarily to maintain profits in the face of rising costs and supply chain disruptions rather than inflate prices. Imposing restrictions on corporate pricing would disrupt the supply-demand balance and harm the economy.
As for Republican presidential candidate Donald Trump, he proposed expanding fossil fuel extraction to reduce energy costs to tame overall inflation. Yet experts cautioned that this plan may fall short of its promises.
“It’s mostly just bluster because the president actually doesn’t have any direct control,” said Michael Webber, a professor of energy resources at the University of Texas at Austin.
Many of the largest shale drillers hesitate to ramp up production due to the uncertain global economic outlook. “There is nothing that you could wave your magic wand at from a political perspective and get that kind of an increase in production,” said Adam Rozencwajg, managing partner at the natural-resource investment firm Goehring & Rozencwajg.
On trade policies, Trump proposed imposing tariffs of 10-20 percent on all goods imported from foreign countries and a staggering 60 percent tariff on goods from China, which triggered concerns about further inflation.
“A 10 percent tariff on all imports would make everyday items like clothing and toys up to 10 percent more expensive. Domestic manufacturers, facing higher costs for imported parts and components, would also raise their prices,” said former Assistant U.S. Trade Representative William Krist.
Tariffs could cost American families an extra 1,500-1,700 dollars annually. Additionally, Trump has promised “the largest deportation” operation in American history. But mass deportations would lead to a shortfall in labor and impact production, driving prices even higher, said Mark Nance, associate professor at the School of Public and International Affairs of North Carolina State University.
UNSUSTAINABLE PLANS
Harris and Trump have made many other proposals to address rising prices. For example, Harris has suggested measures such as increasing housing supply to curb prices, offering subsidies for first-time homebuyers, reducing taxes for small businesses and low-to-moderate-income families, and expanding support for low-income households.
On the other hand, Trump has announced a sweeping tax reform plan that would reduce or even eliminate personal income taxes for many Americans. U.S. media estimated that Trump’s tax proposal could benefit around 93 million American voters, roughly a third of the electorate. However, both candidates failed to explain how they could cover the substantial costs of their plans, raising questions about their feasibility given the high federal debt.
These empty pledges are unlikely to solve the soaring inflation and could further exacerbate the U.S. debt burden, deepening the country’s struggle with unsustainable fiscal spending. The Committee for a Responsible Federal Budget, a fiscal think tank, estimated earlier this month that Harris’s plan would increase the debt by US$3.95 trillion through 2035, while Trump’s plans would create US$7.5 trillion in new debt.
As politicians of both parties continue making empty promises, America has witnessed a massive increase in wealth inequality over the past 60 years. In 1963, the wealthiest families had 36 times the wealth of families in the middle of the wealth distribution. By 2022, they had 71 times the wealth.
The combined wealth of the U.S. billionaires on the Forbes Real Time Billionaire list reached US$5.529 trillion in 2024, increasing by 87.6 percent compared with 2020. The economic gap is further exacerbated by stagnant federal minimum wages, unchanged since 2009, which has left many working Americans struggling to make ends meet.
teleSUR/ JF Source: Xinhua
