Title: Trump Can't Alter Living Expenses Directly, but There Are Ways to Alleviate Costs
In the heat of the 2024 presidential campaign, President Donald Trump criticized former President Joe Biden for the escalating cost of living and promised to fix the issue. With a flurry of executive orders shortly after taking office, Trump signed the "Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis" decree.
Indeed, addressing the rising cost of living is a pressing concern. After all, median household incomes have failed to keep pace with the increasing expenses of living for the past four decades. Those close to the median income, as well as lower-income individuals, have suffered most due to this discrepancy. Despite various political debates and issues driving the election outcome, people's financial well-being played a significant role in electoral choices.
Many Americans voiced frustration over the gradually increasing living costs. These extraordinary price hikes were significantly exacerbated by the pandemic. Trump's executive order acknowledges the difficulty experienced by hardworking families, who grapple with rising fuel, food, housing, auto, medical care, utilities, and insurance prices.
However, the new president's order attributes these soaring costs to the current administration, but this simply isn't the case. In fact, it wasn't primarily consumer demand or even inflation that triggered the price increases. Instead, the culprit was the collapse of international supply chains. This system, rich in the intricate interplay between companies and clients, involved various factors and components being produced, shipped, and incorporated into a product's creation.
The global supply chain collapse caused the prices to skyrocket. Although inflation has since slowed down, it's essential to understand that prices continue to climb, even if the rate slows down. In November 2024, on the "Face the Nation" show on CBS News, economist Mohamed El-Erian pointed out the complexities of getting prices down. He emphasized that while interest rates and inflation may decrease, prices themselves tend to remain high because consumers expect a decline in prices, not just a slowed rate of inflation.
El-Erian explained that dramatic price reductions are typically associated with deflation, a dangerous economic situation associated with the Great Depression. Deflation tends to discourage spending, as people delay purchasing because they assume prices will fall further. The resulting drop in sales leads producers to cut back on production, causing layoffs and further income loss, which ultimately leads to a downward economic spiral.
The housing market has specifically been impacted by the pandemic due to multiplying factors. Low-interest mortgage rates, given the prevalence of low-yield government bonds, enticed investors to pour capital into the real estate market, including commercial properties like apartment buildings. The flood of money drove up house prices. Additionally, inflation pushed up interest rates. As homebuilders anticipated rising rents, they structured their deals according to this expectation. If renters' financial expectations are not met, they may struggle to cover increased mortgage payments, threatening serious economic consequences.
Reducing prices in any sector is a formidable challenge. Trump's executive order blames the recent price increases on Biden and restates his commitment to deliver emergency price relief to Americans. The order urges various government agencies to work towards this goal, but it remains unclear what specific actions can be taken under U.S. law to bring prices down. The continuous argument that regulation is the primary catalyst for price increases is debatable, as the underlying problem is a complex interplay of socioeconomic factors.
In summary, the cost-of-living crisis in the United States, particularly the impact of the pandemic on housing, is the result of multiple interconnected factors. From supply chain disruptions to regulatory hurdles and economic policies, the current state of affairs points to the necessity of a multifaceted approach to addressing and ultimately solving this critical issue.
Trump's executive order aimed to provide emergency price relief for families struggling with rising costs, including housing, food, and utilities. Despite blaming former President Biden, analysts attribute the cost increases to disruptions in global supply chains. Despite the order, reducing prices in any sector is a significant challenge in the face of complex socioeconomic factors. Income growth has failed to keep pace with rising living costs for decades, affecting median and lower-income households significantly during elections.
