The specter that haunts Harris (and Biden) and from which Trump benefits

new York
CNN
—

The fingerprints of inflation are all over the race for the White House in 2024.

Skyrocketing prices at the gas station, supermarket and virtually everywhere else spooked Americans in the first days of President Joe Biden's term.

Fair or not, inflation almost immediately turned voters away from Bidenomics and tarnished his re-election chances.

The inflation rate has now almost returned to normal – miraculously, without the recession and the loss of millions of jobs that many predicted. The economy's growth rate is relatively high and the unemployment rate remains historically low.

Soft landing or not, voters remain frustrated. And who can blame them?

Life is so much more expensive than it was a few years ago. Prices have not returned to pre-COVID levels and probably never will.

For far too many, the American dream seems unattainable.

It's not just because of record-high home prices, but also the fact that mortgage rates remain high even after an aggressive rate cut by the Federal Reserve. Some lucky first-time buyers got in when prices were lower and borrowing was dirt cheap. Many others look from the outside in.

Frustration over affordability continues to dog Vice President Kamala Harris, who has repeatedly been forced to defend the administration's economic track record.

Harris has made tackling prices a central part of her agenda. She called for raising the minimum wage, expanding tax credits for parents and building more homes.

Even as Harris delivered her closing statement from the historically significant Ellipse with the White House in the background, she emphasized affordability.

“Now our biggest challenge is to reduce costs, which were already rising before the pandemic and are still too high. I understand,” Harris said in her big speech last week.

Harris also understands that economic fears fueled by inflation have helped boost the popularity of her opponent, former President Donald Trump.

Trump likes to remind voters that inflation wasn't a problem when he was in the White House.

And he's right: The inflation rate never exceeded 3 percent under Trump – a far cry from the four-decade high of 9.1 percent under Biden.

Of course, Trump did not face the supply chain nightmare that contributed to the price rise. And he didn't let oil prices rise above $100 a barrel as Russia invaded Ukraine, an energy crisis that drove gas prices to record highs.

Regardless of the reason, prices are clearly much higher today.

According to Moody's Analytics, the typical U.S. household is spending $1,120 more per month to purchase the same goods and services as it did in January 2021, when Biden became president.

But it is also true that employees are now enjoying real wage increases.

Income continues to rise faster than inflation. That means paychecks are outpacing prices, a trend that should allow consumers to catch up and feel better.

According to Moody's, a typical household earns $1,192 more per month than in January 2021, narrowly exceeding inflation.

Still, that doesn't feel good enough.

Many Americans work extremely hard and deserve these raises. It can be deeply frustrating when larger paychecks are swallowed up by higher rent and higher car insurance payments.

Trump has promised to bring the cost of living under control through restructuring.

“I will end inflation,” Trump told a cheering crowd of supporters in battleground North Carolina on Wednesday. “I’m going to bring back something called the American Dream.”

Trump has proposed imposing tariffs on all $3 trillion in U.S. imports, including steep 60% tariffs against China. His plan calls for mass deportations as part of an unprecedented crackdown on immigration. And Trump has argued that the president should at least have the opportunity to express his opinion on the Federal Reserve's interest rate policy.

Trump's calls for strong action and sweeping change resonated with many voters. In many polls, more voters say they trust Trump more than Harris when it comes to the economy.

And yet, one of the greatest ironies is that mainstream economists not only reject Trump's promises to fight inflation, but also warn that his solutions will make the situation much worse.

They fear his tariffs will drive up prices for consumers and that the deportation of millions of illegal workers will create a labor shortage.

In fact, some argue that Trump's policy proposals are extremely inflationary, perhaps the most inflationary that a major presidential candidate has ever faced in his lifetime.

More than two-thirds of economists surveyed by The Wall Street Journal (68%) say prices will be higher under Trump than under Harris.

“Just as Mexico didn’t pay for a wall in its first term, China won’t pay Trump’s tariffs if he gets a second term. You will,” economists wrote in an open letter that has garnered more than 300 signatories in recent days.

And yet, if Trump wins, it will be thanks in large part to… inflation.