Monday, December 2, 2024

Commentary: One of the biggest election factors is also one of the most misunderstood — inflation

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Inflation played a big role in the outcome of this year’s presidential election, but who to blame for it may have not been on the ballot.

About half of Trump voters cited high prices as the biggest issue affecting their vote, according to AP VoteCast, which surveyed over 115,000 voters nationwide. Almost 1 in 4 voters said inflation caused a severe hardship, according to exit polling data from Edison Research, with nearly three-quarters of them voting for Trump.

“Inflation is something that people deeply dislike, and that leaves lasting scars,” Stefanie Stantcheva, a professor of political economy at Harvard University who recently did a study examining how people perceive inflation, wrote to Yahoo Finance. “And our findings suggest that many people blame the government for it.”

A shopper checks price at a grocery store in Chicago on Sept. 19. (AP Photo/Nam Y. Huh) · ASSOCIATED PRESS

But the government may not be the right culprit. Who or what deserves the blame is harder to parse out. Even among economists, inflation, especially the source of its recent surge, is still hotly debated.

“Inflation is a really, really hard-to-understand phenomenon,” Stantcheva said, “and economists disagree about its causes and consequences.”

Read more: What is inflation, and how does it affect you?

What’s not up for debate is that consumer prices surged following the pandemic. The spike was also a global phenomenon.

In the US, the inflation rate hit its highest point in this recent surge in June 2022 at 9.1% before interest rate hikes that the Fed implemented three months earlier started to curb the surge. Across the world in G7 countries, those recent peaks occurred later, but a similar trajectory emerged.

Survey after survey found that Americans were ticked off about the rise in prices. While part of that may have stemmed from its sudden unfamiliarity after living in a low, low inflation environment for a decade, their loathing is also deep-seated.

Folks largely feel the same way about inflation as they did in 1996, according to two academic surveys conducted then and now. Their gripes remain similar too: A big majority believe inflation erodes their purchasing power, which is correct, and that inflation means the economy is poor, when in fact the economy is growing very fast.

Stantcheva, who conducted the second survey of consumers on their feelings toward inflation, found in another recent study that people, especially Republicans, largely blame the government for inflation. That would track with the recent election outcome that rejected Biden’s vice president.

Still, the president has limited power when it comes to combating inflation, said William Luther, the director of the sound money project at the American Institute for Economic Research, a libertarian think tank, with the Federal Reserve holding more of the cards. Congress, too, is instrumental in any government spending.

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