The main reason Americans are dissatisfied with the economy: They are still adapting to the high prices that soared during the years of runaway inflation that occurred during former President Joe Biden’s tenure.
Inflation is no longer in crisis, so the best way to help the economy has been to reduce interest rates to stimulate job and wage growth.
Who summed up the situation best: President Donald Trump or his economic arch-nemesis, Federal Reserve Chairman Jerome Powell?
Within 24 hours, Trump and Powell addressed Americans to address crucial economic issuesincluding cost of living concerns. Both discussed their preferred policies to improve the population’s financial prospects.
Despite Trump’s constant personal insults addressed to Powell – and their diametrically opposed approach to public discourse – the president and the Fed chairman have largely articulated the same problems and the same solutions.
Powell just made the argument a little clearer. Well, actually, much clearer.
The fact that they agree, at least on a few fundamental economic principles and policies, represents an extraordinary development: because Trump routinely smears Powell and plans replace it next year and why Trump has had difficulty winning deeply skeptical Americans regarding the economy, and he may have found the perfect spokesperson in his least favorite nominee.
Trump is losing the legitimacy of being “Mr. Economy” after winning the election largely on an affordable-living agenda. Consumer opinion polls and political polls consistently show that Americans are fed up with Trump’s economic management because the cost of living is very high.
That has turned into a growing political crisis for Trump and Republicans, and the president acknowledged in a speech in northeastern Pennsylvania on Tuesday that his aides had persuaded him to travel the country to begin communicating the benefits of his economic agenda, aiming to sway voters ahead of next year’s midterm elections.
Trump undermined the argument of his prepared speech by rambling about the economy with a series of exaggerated claims and unconvincing false statements.
But his central argument on Tuesday (9) (and throughout his term) can be boiled down to this:
- Inflation is under control.
- Your historical rates will not be inflationary in the long run.
- If Americans are feeling economic hardship, it is because of the highest inflation that has hit the Biden administration in decades, not because of Trump’s policies.
- The solution to this problem is to reduce interest rates to stimulate the economy and the job market.
Trump obviously has an unorthodox and often counterproductive approach to economic policy, which confuses his arguments.
For example, he has repeatedly and falsely stated that there is “no” inflation and that affordability is a “hoax.” He significantly overestimated the revenue generated by customs duties and incorrectly argued that they did not cause price increases. Trump exaggerated the 2022 inflation crisis, classifying it as the worst in US history. And his pressure campaign on Powell to lower interest rates undermined the Federal Reserve’s crucial independence.
But do you know who largely agrees with Trump’s central argument? Jerome Powell.
On Wednesday (10), Powell stated that the US economy faces two simultaneous problems, posing a unique challenge for the Fed: the job market is worsening, while inflation is rising. This is concerning because the Fed’s interest rate-setting tool can typically help stimulate the labor market or control prices, but not both.
Thus, the Fed needed to choose – and, at its monetary policy meeting that ended on Wednesday, it chose to try to boost employment by reducing interest rates, even at the risk of worsening inflation.
The reasons given by Powell at a press conference are almost identical to Trump’s arguments.
- Annual inflation is recovering and exceeding the Fed’s long-term target of 2% (currently ), and the only reason is Trump’s historic tariffs. Although uncomfortable, inflation is not in a danger zone.
- But tariffs are not inflationary in the long run. They will set new higher prices, but they will not keep them rising.
- Recent inflation is not the reason Americans are experiencing financial hardship. The main cause is the drastically higher prices resulting from the inflationary crisis of 2022 and 2023, to which consumers have not yet adapted.
- The solution was to cut interest rates three times in the last four months to stimulate a slowing job market and help wages rise, allowing people to better afford rising prices.
“We’re going to need a few years where real pay is higher… for people to start to feel good about the affordability issue,” Powell said. “We are trying to keep inflation under control, but also support the job market and high wages so that people earn enough and feel economically healthy again.”
It’s Trump’s basic argument, just stated in clearer and more coherent terms – and free from hyperbole and untruths.
So if Trump is looking for a spokesperson to help him make his case on the economy, he might want to turn to Powell. The Fed chairman will be looking for his next job very soon.
