Affordability Is Trump’s Albatross and He Can’t Get Rid of It

How did this reversal happen? Partly because the “affordability crisis” is not a term of economic art so much as a political incantation. Economists would start by examining real wage data. If pay rises faster than the price level, life is becoming more affordable. For the median American household, that has been true for most of this year: real weekly earnings were up 0.8 per cent through the third quarter. Yet dissatisfaction with living costs has nevertheless grown.

The political lesson is that, after bouts of high inflation, it is the price tags that annoy voters. They are still appalled that American supermarket food prices are up 25 per cent since 2021, electricity 36 per cent and used car prices 20 per cent. That “sticker shock” is toxic for Trump. He did not promise gradual real wage gains; he promised falling prices. About a fifth of voters were very confident he would even lower their grocery bills. Absent outright deflation, they have become disillusioned.

The president does not know what to do about it. One minute he weakens fuel efficiency standards to make cars more affordable; the next he decries the Democrats’ “affordability hoax”. His frustration is born of powerlessness. Inflation and deflation stem from macroeconomic imbalances between money and production. Trump obviously does not support crushing the demand side with ultra-tight monetary and fiscal policy just to force the overall price level back down. Yet, as Sir Keir Starmer now understands, governments cannot conjure lower prices quickly by willing faster output growth either.

That leaves politicians tinkering in sectors voters care about most. In opposition, Democrats such as New York’s Zohran Mamdani and progressives in Congress are liberated to promise “relief” via price controls on rents and bus fares, higher minimum wages and new healthcare subsidies. At best, these change who pays. At worst, they create shortages, black markets and inefficiency.

It is difficult for Republicans to make similarly appealing retail offers. Sure, they could champion reforms to increase the supply of housing, energy, food, childcare and more. But that deregulatory agenda is both politically contentious and takes time to move the needle on prices. Time they apparently do not have.

So the discontent grows. And, in truth, Trump ignored warnings and made himself more vulnerable to this becoming a political albatross. His own headline policies have helped nudge inflation up to 2.8 per cent, modestly above the Federal Reserve’s 2 per cent target.

Tariffs and immigration clampdowns are stagflationary, at least in the short term. They raise certain prices directly and weaken growth by making production less efficient. That feeds into higher domestic prices for goods protected by the tariff wall, or for firms that see input costs rise. Artificial Christmas trees, certain cars, some food items and some watches have all jumped in price.

Then there is irresponsible borrowing. The US budget deficit was $1.8 trillion in fiscal year 2025, a massive 6 per cent of GDP. The country’s unsustainable fiscal trajectory, without correction, will force the Federal Reserve into monetising some of the high and growing US debt. These fears are only heightened by the president’s mood music about curbing Fed independence and the need for the central bank to support lower government borrowing costs.

The result is the sharp turnaround we have seen. The Democrats may have explicitly championed “running the economy hot” with fiscal and monetary stimulus, exacerbating inflation and fuelling this discontent to begin with. Yet Trump’s overpromising and policy decisions have left him reaping the consequences of an issue that most analysts think cost the Democrats the presidential election.