Local opinion: It’s the economy, stupid

With Election Day looming on the horizon, I’m reminded of James Carville’s famous quote prior to the 1992 election: “It’s the economy, stupid.”

The American economy in 2024 is a contradiction. Unemployment is low, the stock market is at record highs. GDP continues to grow steadily. Corporate profits are at record levels. But prices are high, and people are angry. As we cast our ballots, we need to ask ourselves two questions: Who is to blame, and what happens next?

Post-COVID inflation is not uniquely American. According to the Pew Research Center, the U.S. inflation rate over the past two years sits squarely in the middle of the pack when compared to other developed countries. What really sets our economy apart from others is what didn’t happen: a recession.

In June of 2020, the World Bank predicted “the worst recession since World War Two”. Three months later the IMF predicted “the worst economic downturn since the Great Depression.” Neither happened.

In a speech on Oct. 22, 2020, President Trump said if Biden was elected, “the stock market would crash.” The S&P index closed at 3,465 that day. Four years later, on Oct. 22, 2024, the S&P closed at 5,851.

There was a short recession — approximately two months’ worth from February to April 2020. After that, the economy took off. Government programs like the PPP loans started by the Trump administration and continued by Biden kept businesses afloat and incentivized business owners to keep employees on the payroll. Further COVID relief funds paid directly to American families continued well into 2023.

All those billions of dollars provided the post-COVID “soft landing” for the economy, but they also set up the inflation that’s become such an issue.

Worldwide supply chains disrupted by factory shutdowns and transportation delays severely decreased the availability of goods. Simultaneously, American consumers high on the sugar rush of free government money went looking for places to spend it. That increased demand coupled with decreased supply drove prices higher. Economics 101

Other world events exacerbated the problem. Avian flu destroyed poultry flocks and drove egg prices higher. Russia’s invasion of Ukraine disrupted global energy supplies and grain exports.

So what’s next? Which candidate is going to bring prices down? Political posturing aside, very little a President does actually has a direct impact on consumer prices, but there are two things on table now that will. First and foremost are tariffs.

Let’s be clear: China does not pay tariffs. Not one cent. So who does pay?

Tariffs are paid by U.S. companies that import goods. Prior to my retirement, I owned a company that sourced goods from multiple countries, including the U.S. and including China. I wrote the checks for hundreds of thousands of dollars to the U.S. treasury. No business can afford to absorb a 25% cost of goods increase, and I did what every other business owner did — raised prices to our distributors. Those distributors raised their prices to the retailers who sold our products, and the retailers in turn raised prices to consumers.

The new tariffs Donald Trump is promoting are 60% on goods from China and 20% on goods from everywhere else. Do the math. Current estimates are that these new tariffs will cost the average family more than $4,000 per year.

American consumers will also be affected by deportations. Estimates vary, but approximately 25% of the workforce harvesting our crops is undocumented. If these people are deported, farmers will either be forced to pay American workers to work at significantly higher wages, resulting in higher prices — or crops will rot in the fields, resulting in higher prices.

It’s human nature to try to assign blame when we face hardships that are no fault of our own, and it’s easiest to assign that blame to those in power. It’s also difficult to see the bad things that could have happened but didn’t. At this time of decision, it’s important to look forward, and everything looking forward points to higher prices under a Trump administration. It really is the economy, stupid.