The main reason Americans are upset about the economy: They are still adjusting to high prices that surged during years of runaway inflation that took place during former President Joe Biden’s term.
Inflation is no longer in crisis, so the best way to help the economy has been to cut interest rates to stimulate job and paycheck growth.
Who said it best: President Donald Trump or his economic archnemesis, Federal Reserve Chair Jerome Powell?
Within a span of 24 hours, Trump and Powell each addressed Americans about key economic issues, including affordability concerns. They both discussed their preferred policies to help people’s financial prospects.
Despite Trump’s constant personal insults aimed at Powell – and their polar opposite approach to public discourse – the president and the Fed chair largely articulated the same problems and the solutions.
Powell just made the case a little more clearly. Well, OK, a lot more clearly.
The fact that they agree, at least on a small handful of core economic principles and policies, represents an extraordinary development: 1) because Trump routinely drags Powell through the mud and plans on replacing him next year. And 2) because Trump has struggled to win over deeply skeptical Americans on the economy, and he might have just found the perfect spokesperson in his least-favorite appointee.
Trump is losing the argument that he’s Mr. Economy after winning the election primarily on an affordability agenda. Consumer sentiment surveys and political polls consistently show that Americans are fed up with Trump’s handling of the economy because the cost of living is too high.
That has grown into a budding political crisis for Trump and Republicans, and the president acknowledged in a speech in northeast Pennsylvania Tuesday that his advisers persuaded him to go on the road to start communicating the benefits of his economic agenda to sway voters ahead of next year’s midterm elections.
Trump undermined the argument of his prepared remarks by riffing on the economy with a series of unconvincing, hyperbolic assertions and false statements.
But his core argument Tuesday (and throughout his term) can be chalked up to this:
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Inflation is in check.
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His historic tariffs won’t be inflationary over the long term.
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If Americans are feeling economic pain, it’s because of decades-high inflation under Biden, not because of Trump’s policies.
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The solution to that pain is to lower interest rates to stimulate the economy and job market.
Trump, of course, has an unorthodox and often self-defeating approach to economic policy that muddles his argument.
For example, he has repeatedly and falsely stated that there is “no” inflation and affordability is a “hoax.” He has significantly overstated the amount of revenue tariffs have brought in and incorrectly argued that they have not caused prices to rise. Trump has exaggerated the 2022 inflation crisis as the worst in US history. And his pressure campaign on Powell to lower interest rates has undermined the crucial independence of the Federal Reserve.
But you know who largely agrees with Trump’s core argument? Jerome Powell.
Powell on Wednesday said the US economy faces two concurrent problems, posing a unique challenge for the Fed: The job market is getting worse, while inflation on the rise. That’s a concern because the Fed’s rate setting tool can typically either help stimulate the job market or bring prices in control – but not both.
So the Fed needed to choose – and at its policy meeting concluding Wednesday, it chose to try to boost jobs by lowering rates at the risk of exacerbating inflation.
The reasons Powell laid out in a briefing with the press are nearly identical to Trump’s argument.
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Annual inflation is rebounding above the Fed’s long-term target rate of 2% (it currently sits at 2.8%), and the sole reason is Trump’s historic tariffs. Although uncomfortable, inflation is not in the danger zone.
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But tariffs are not inflationary over the long haul. They’ll set new, higher prices, but tariffs won’t keep causing them to rise.
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Recent inflation isn’t the reason why Americans are feeling a financial pinch. The root cause is the dramatically higher prices from the inflation crisis of 2022 and 2023 that consumers haven’t yet adjusted to.
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The solution has been to lower rates three times over the past four months to stimulate a slowing job market and help paychecks grow to help people better afford those rising prices.
“We are going to need to have some years where real compensation is higher … for people to start feeling good about the affordability issue,” Powell said. “We are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money and feeling economically healthy again.”
It’s Trump’s basic argument, only spelled out in clearer and more coherent terms – and devoid of hyperbole and untruths.
So if Trump is looking for a spokesman to help make his case on the economy, he may want to turn to Powell. The Fed chief’s going to be looking for his next gig pretty soon.
