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Over the past three years, everything we expected the economy to work has been upended. That’s at least in part why many wealthy people don’t seem to care about economists’ warnings that Donald Trump’s policies will cause inflation (which has finally fallen to normal levels) to spike again. be.
Inflation hurts everyone’s wallet, whether you’re a Wall Street banker or a public school teacher. But it hurts in many ways.
Rising rent and food costs are hitting middle- and low-income families the hardest in areas where blue-collar workers tend to spend the majority of their incomes. And historically, high inflation has also hurt the wealthy by eating into corporate profits and weighing down stock markets.
But the pandemic-era period of inflation was unprecedented in history, with the wealthy playing like bandits.
“It’s a good result for high-income people who have assets,” said Kent Smetters, a professor of business economics and public policy at the Wharton School at the University of Pennsylvania. “There’s no question that the stock market is rising much more than inflation. It’s been up 20% for almost two years in a row, which is pretty amazing.”
It’s also a very favorable situation for homeowners, as real estate values have soared and inflation has eroded the nominal value of monthly mortgage payments.
And while it’s true that wages for low-income people have risen faster than inflation over the past two years, those increases have not been evenly distributed and have done little to stem entrenched income inequality. Before 2020.
The point is that many wealthy Americans who may once have felt uncomfortable about the possibility of a spike in inflation suddenly seem less worried about it. And that may be because the only real inflation we’ve seen in recent decades was for the very rich, who benefited them over multiple years.
And that provided some wealthy Trump supporters with a permission structure to shrug off his inflationary economic policies.
President Trump does not have a detailed policy plan, but he has promised huge tax cuts for businesses, mass deportations of illegal immigrants, and exorbitant tariffs on imported goods. He has also casually floated the idea of taking over the Federal Reserve’s power over interest rates, a key tool for managing inflation.
Nearly 70% of economists surveyed by the Wall Street Journal said prices would rise faster under the Trump administration than under the Harris administration, and 23 Nobel laureates called Trump’s “counterproductive” economic policies. He supported Mr. Harris’ proposal regarding the
“In terms of inflation coming out of the blue, it’s really going to look like inflation is going back to 2021 levels,” said Josh Bivens, chief economist at the nonprofit EPI Action.
But it won’t be the kind of profit-driven inflation we’ve seen over the past three years.
Bivens said pandemic-era inflation has given some companies a monopoly over parts of the economy at a time when many supply chain bottlenecks and competitors are unable to provide more output to the outside world. He said it gave him such power. “This time it will be a more widespread and unregulated supply-side price drive.”
Trump’s campaign and allies continue to emphasize the fact that the economy did not experience inflation during President Trump’s first term. But from 2017 to 2019, everything about the economy was different than it is today.
“In 2018 and 2019, you would have had to do something incredibly different to cause inflation,” Bivens said. “But things have changed a lot with the shocks of the last few years. On the positive side, with the pandemic and the Russian invasion of Ukraine, and the very quick recovery from the corona shock, we now know that if we do the wrong thing, we can avoid inflation. It has become an economy that can cause
