Inflation is front and center for many voters as they look toward the 2024 election. From rising prices to economic frustration, it’s shaping the political conversation both locally in New Jersey and nationally, particularly as candidates like Donald Trump make bold claims about how they would tackle it. Understanding the current climate of inflation, especially how it impacts New Jersey, is key to decoding these political messages.
So, what exactly is inflation? According to the Federal Reserve, it refers to the average price level for goods and services steadily rising over time. It’s important to note, though, not every price increase signals inflation. For example, if bad weather damages orange crops, leading to higher juicing costs, it doesn't paint the whole economic picture. Rather, sustained price increases across various sectors indicate true inflation. Estimates show inflation surged to about 7% back in 2022—a tough year for many as global supply chains were strained post-COVID-19 and conflicts impacted energy costs. The Fed keeps close tabs on inflation by using price indexes to measure the costs of everyday items people buy.
But how are things shaking out now? Nationally, consumer prices have increased by approximately 2.4% over the past 12 months, aligning with the Federal Reserve’s goal. But things are tougher for folks living in New Jersey. Recent figures from the Bureau of Labor Statistics show inflation here is slightly steeper, with prices rising by about 3.4%. And even higher, at 3.8%, are the prices reported for the New York-Newark-Jersey City metropolitan area, which encompasses much of northern New Jersey. Groceries might be up 2.1%, but housing is feeling the pinch with prices soaring 5.8%. Energy costs haven’t escaped the trend, either, rising by 5.9%, even though motor fuel has surprisingly dropped by close to 15%. These statistics suggest cash-strapped consumers are feeling the effects of inflation acutely.
Looking for solutions, the Federal Reserve recently slashed interest rates to 4.75-5%, its first cut since March 2020, responding to shrinking inflation. Many hope these moves will help ease the economic strain and support recovery. But with political storms brewing, these plans could face scrutiny, particularly with candidates like Trump making incendiary pledges (he truly believes he can eradicate inflation altogether).
Will his economic proposals really solve inflation? Most mainstream economists aren’t optimistic. They argue Trump’s ideas—like imposing heavy tariffs on imports and managing the Federal Reserve’s policy—could actually worsen inflation. A letter endorsed by 16 Nobel Prize-winning economists even stated concerns Trump's policies could reignite inflation, which had been steadily dropping after hitting peaks as high as 9.1% back in 2022.
According to experts, Trump's economic vision, which includes significant tariffs and the mass deportation of immigrant workers, might lead to price increases for Americans. For example, significant tariffs on Chinese imports proposed by Trump could soar up to 60%. Those taxes aren’t absorbed by foreign manufacturers; rather, they end up pushing prices higher for consumers domestically. This means everyday costs for items like groceries could climb even higher than they already have.
Proponents of tariffs, including Trump, argue they defend American jobs by curbing foreign competition. Back when he was president, Trump did launch what many considered to be trade wars with countries like China, resulting in high tariffs on various goods, including steel and aluminum. But if his promise to restore such tariffs gains traction again, the pressure will inevitably result in increased prices for consumers, creating more strain on local households already juggling the costs of living.
Economists point out this picture is even worse when it examines the future. Studies from the Peterson Institute for International Economics warned implementing Trump’s packages could spike inflation, potentially sending it skyrocketing to between 6% and 9.3% by 2026. This prospect is alarming, especially as current inflation rates are finally starting to settle closer to the Fed's 2% goal.
Notably, the narrative isn’t solely focused on Trump. Vice President Kamala Harris is also noted for her economic policies. While many regard her ideas as ineffective on their own, they’re not seen as inflationary. According to Mark Zandi of Moody's Analytics, her plans would hardly change the inflation outlook. So, amid political maneuvering, it’s clear even Democratic leaders are scrambling to address these key economic issues.
Rising inflation is undeniably altering the economic discussion surrounding immigration as well. Trump has suggested deporting millions of undocumented workers, claiming it would reduce pressure on wages and dampen inflation across the board. While many recognize the potential for such policies to backfire, they also reflect the fundamental economic challenges facing American workers.
Research indicates increased immigration helps maintain labor supply, allowing businesses to stabilize growth without raising wages too sharply, thereby curbing inflationary pressures. Many economists believe the recent influx of workers has actually kept job growth surging without triggering inflation. This was especially important as job growth surged following the lifting of pandemic restrictions. Any significant deportation efforts could distort this welcome balance, as firms may struggle to attract new talent, leading to higher pay demands and eventually pass those costs back down to consumers.
Then there’s the matter of how Trump envisions steering the Federal Reserve. Just this past August, Trump suggested he would want to influence the Fed’s interest rate decisions, which many economists view as political meddling with unfortunate consequences. The Fed's independence is pivotal to its success at battling inflation since political leaders often favor low rates to boost growth, creating headwinds for inflation control. The Fed’s job is to maintain price stability, and historical analysis shows political pressures can weaken their effectiveness. Trump’s earlier public pressure on Fed’s chair Jerome Powell during his initial term raised concerns about what might happen should he regain office.
The interplay between inflation's current state and Trump’s proposed economic policies underlines the complexity of the choices facing American voters, particularly those relying on incomes strained by rising prices. Predictions suggest Trump's straightforward approach to dismantling barriers could likely result in even greater challenges for consumers grappling with higher costs of living rather than directly addressing the inflation their economic roadblocks create.
The threat of inflation remains palpable, especially for New Jersey’s economy, where residents are feeling the immediate pinch from rising prices. And as the political machines gear up for the next electoral season, it'll be fascinating to see how candidates articulate their plans. From Trump’s ambitions to Harris' plans and everything on the economic spectrum between, only time will reveal if politicians grasp the realities of rising prices or if political aspirations will continue to fuel economic woes.
