So What Will Trump's Policies Mean For The Cost Of Living?
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Hey there, it's the NPR Politics Podcast. I'm Deepa Shivaram. I cover the White House. I'm Mara Liason, Senior National Political Correspondent. And NPR's Scott Horsley is here to talk about the economy. Hey, Scott. Good to be with y'all. Thanks for coming. So big takeaways from this election. Kind of

hard to be an incumbent when the last four years have been, you know, years of people struggling with the cost of living and trying to afford basic needs like groceries, child care, etc. How are you thinking about how the election played out last week? I think you can think of lots of different reasons people had to vote the way they did. But one clear takeaway is that people really, really hate it when the cost of living goes up.

when they have to pay more for rent or groceries or insurance. They really don't like that, and they tend to take it out on whichever person or party is in charge at the moment. We've seen that through the decades, and we've seen it across national boundaries. Governments have been toppled from Pakistan to the UK to Brazil and Italy because of the inflationary spike we saw all over the world in the wake of the pandemic.

And that was a very difficult environment for Democrats and Kamala Harris. So, Scott, obviously, we know that inflation defeats presidents. Inflation is the most important political economic indicator. And we know that if Biden could have reversed prices and gotten them down, he would have. What can presidents do now?

lower prices. I mean, Donald Trump told people he would get this fixed as soon as he won. That's right. He hasn't really offered a prescription to get prices down. He has talked about increased oil production. But of course, we're already producing oil at record levels. And actually, gasoline prices have come down quite a bit from their peak in the summer of 2022. Lots of other prices have stayed high, even though they're not still going up really fast. You are seeing a lot of Democratic economists

questioning the decisions that were made early in 2021 to really go big with the American Rescue Plan. Now, of course, the government also went very big with economic stimulus under the Trump administration back in 2020 to counter the effects of the pandemic. But

But those aggressive efforts to cushion the blow from the pandemic continued into 2021, and that may have put some further upward pressure on prices. The main causes of inflation were the aftershocks of the pandemic itself and all the resulting supply chain snarls. And then, of course, the war in Ukraine, which supercharged energy prices and food prices. But the $1.9 trillion American Rescue Plan may have also put upward pressure on prices at the margins.

And the reason Democrats did that was they were burned by the experience coming out of the great financial crisis when they didn't think the government had done enough. You might remember Treasury Secretary Janet Yellen saying it's better to do too much than to do too little. And in fact, doing perhaps too much did really help to –

boost job growth and made for a very tight labor market where wages went up pretty rapidly. But it also maybe affected prices and people really, really hate those high prices. So it sounds like you're saying that there are things presidents can do that will exacerbate inflation, but there isn't anything they can do to bring prices down. Is that what you're saying?

It's pretty tough. I've not seen any magic wand that's going to work. What they can do is try to boost wages so they keep pace with inflation and eventually overtake it. And over time, we have seen wages start to catch up with these high prices, and they will presumably overtake it. And people see real increases in their buying power. We've seen wage growth outpacing price growth for well over a year now.

But people are still really unhappy with those cumulative price increases of the last few years. And Scott, part of this is also that people, you know, consumers, voters, et cetera, were looking maybe for a faster fix here, right? There was a lot that the Biden administration tried to do. Obviously, we know there's no magic lever that the president can pull to fix the economy overnight. But a lot of these efforts and initiatives took time and will have continued to take a lot of time. We'll see what President Trump does with some of these things. But

Is part of what you are seeing is that voters wanted a faster solution here? Yeah, people wanted prices to come down. And we're probably not going to see prices come down for the most part. What we hopefully will see is prices level off or grow up only slowly.

and eventually wages catch up with that. Now, that's what you can really do in real economic terms. There are certainly other questions about messaging. Could the administration have done a better job of messaging what it was doing? Could it have done a better job of explaining why prices were high? Possibly. But the facts are it's really tough in an inflationary environment for incumbents to hold on to their jobs. And we've seen that whether the incumbent party is left, right, or center all over the world,

inflation is just a killer of incumbent politicians. And Kamala Harris had that incumbent label wrapped around her neck. Yeah, definitely. All right, we're going to take a quick break and more in a moment.

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More at asugamage.com. And we're back. And I want to turn to what's coming next, President-elect Trump's policy plans when it comes to the economy on his end, starting off with his plans on tariffs. He's talked a lot about this. Scott, how will that impact the economy, both in the short term, like the coming months after he's sworn in in January, but also, you know, potentially years down the line? Well, I think we're going to have to wait and see exactly what form the tariffs take. You

President-elect talked about universal tariffs on all imports of 10 to 20 percent and then a much higher tariff, maybe 60 percent on imports from China.

If he actually did that, it would have a huge inflationary impact in this country. But there's some thinking that maybe that's all talk and he's going to use this as a bargaining chip and that the actual tariffs that take place won't be that large or that costly. In general, when you slap a tariff on –

on a product. It's a tax on imports. It drives up the price. Trump likes to say that the foreign suppliers pay that price, but in general, it's the U.S. importer that pays the price and in many cases then pass that cost on

Now, when we had tariffs, we had a lot of tariffs imposed during the first Trump administration that did raise costs for consumers. It certainly raised costs for businesses. Some of those costs were passed on to ultimate consumers. The Trump administration, the first time around, didn't slap tariffs on a lot of consumer goods from China. They stopped short of doing that.

So we didn't necessarily see the full brunt of tariffs on consumer prices. But if he actually went through with a 10 or 20 percent tariff on all imports, that would sharply raise costs for consumers. One of the things about covering Donald Trump is there's often a very big difference between what he says he wants to do or what he says he is doing and what he actually does.

When he starts to decide how he's going to put tariffs on things, maybe these tariffs will not be as broad, sweeping, and draconian as he has described them during the campaign. And if he does go through with tariffs, you can certainly expect our trading partners will retaliate with tariffs of their own on U.S. exports. That's not good for U.S. companies that try to sell products overseas.

It's not good for our farmers who tend to rely heavily on export markets. We have very productive farmers who make a lot more food than we can eat in this country, so they sell a lot of it overseas. We saw farmers lose a lot of market share the first time around when other countries retaliated against U.S. tariffs.

Another thing that the president-elect has, you know, campaigned on, talked about a lot is this concept of mass deportations, carrying these out in areas all over the country. There are a lot of people, Scott, who have echoed, you know, a lot of concern about this, of course, and the impacts on, you know, groups like agriculture and things like that. How does something like that, a plan like that potentially play out for how that would also impact consumers? Yeah.

Yeah, I mean, if you're worried about the high cost of groceries, deporting the people who pick and process our food is probably not the best response.

Here again, we don't really know what the reality of policy under a Trump administration will be in comparison to the way he's talked about it. But mass deportation is potentially inflationary. Now, Trump and his running mate, J.D. Vance, have said, well, if you deport a bunch of people who are living in the country illegally, that will free up housing and lower rents.

And I suppose there are pockets of the country with high concentrations of undocumented immigrants where, you know, a mass deportation might actually put some downward pressure on rents. But for the most part, mass deportations would drive up the cost of living. And it would certainly make it hard. It would hurt the agricultural industry. It would hurt the construction industry, which, you know, we need to build more housing. It would certainly hurt...

hospitality, any industry that depends heavily on immigrant labor. The other thing is that the large number of immigrants we've seen in the last few years certainly have caused strains on schools and hospitals and all sorts of government infrastructure, but they have also allowed the United States to add a whole lot more jobs than it otherwise would have been. Our native-born population is

is aging. Many baby boomers are retiring. If it weren't for the high levels of immigration that we've seen in the recent years, we would not have been able to add nearly as many jobs and we would be facing a worse labor shortage, which would also be inflationary. And the other thing Trump has talked about, of course, is, and this came up on both sides between Democrats and Republicans in this presidential race, tax cuts. Who's getting them? Who isn't getting them? How does that impact

what's coming down the line in a Trump administration. Right. Well, of course, the big part of the tax cuts that have been talked about is the extension of the 2017 tax cuts that were passed during the first Trump administration.

Of course, Vice President Harris had also talked about extending most of those individual cuts for everyone making up to $400,000. So there what we're really talking about is avoiding a tax increase when those tax cuts were set to expire next year. Trump has also talked about cutting the corporate tax further, which is one reason we've seen lots of celebration on Wall Street of his election.

And then he has talked about some other targeted tax cuts for specific constituencies, like making tips exempt from taxation. That was, of course, very popular with a lot of tipped workers in Nevada and elsewhere. He's talked about exempting Social Security benefits from taxation. That would be certainly popular with a lot of seniors. He's also talked about exempting overtime income from taxation. Now, all of this is very important.

All of those things would be complicated and would probably invite some gamesmanship, uh,

in the tax business. People trying to get more of their income classified as tips. You might see teachers asking to have some of their income classified as tips so that it would be tax-free. Lots of gamesmanship going on there. But if, in fact, that came to be, it would save some people some money. It would take money away from the government. It would worsen our federal deficit, which is already large.

It could drive up long-term interest rates and mortgage rates as the government has to borrow more money, and that makes it more expensive for everyone else to borrow money. And the extra money circulating in the economy as a result of those tax cuts could make it harder to get inflation under control. Scott, I have kind of like a loosey-goosey question that I wonder if we end on here, which is like we were talking about all of Trump's –

potential plans and policy ideas with the context of knowing that we don't actually know if he's going to enact any or all of these things and in the exact way that they shake out. And I'm curious how much that volatility or relative volatility, like how chaotic does that kind of make the ground that we stand on not exactly knowing what might happen in January, February, March, etc.?

Well, the economy is not crazy about uncertainty, and certainly there'll be lots of uncertainty in the Trump administration. We learned that the first time around. But the U.S. business community is pretty resilient. They'll find ways to work with it. We've talked about a lot of the ways that if Trump's policies were carried out, it could actually make inflation worse rather than better.

I don't think, by and large, voters were going over a checklist of Trump policies and Harris policies and really nickel and diming and saying, which of these is going to be better for my pocketbook? I think they were just very frustrated with the high cost of living as it is now.

And they just said, I'm going to vote with my gut. And my gut doesn't like the cost of living the way it is now. And I want to try something different. People were voting for change. And they got that with a president-elect Donald Trump.

to kind of close the loop on what we were saying in the beginning, choosing the person who isn't the incumbent. There were a lot of factors that motivated voters' behavior in this race. I think the economy is always number one. But in this case, prices were what drove people. And they remembered that during Trump, prices were lower. And they were. There were also other things. I think that this was a clear defeat for the cultural left.

But what's not clear is what else was motivating this. And we're going to be picking through the entrails of this election for a long time. And one of the things that I'm interested in going forward is how much Donald Trump will be held responsible for the economy. People in retrospect pretty much gave him a pass on how he handled COVID. They didn't give him a pass in 2020. That's one of the main reasons that he lost. People thought he had bungled the response to the pandemic.

But then they kind of gave him a pass. And I wonder if prices stay high, will he be able to get away with saying, hey, that's Joe Biden's fault, not mine? We'll see. All right. We're going to leave it there for today. Scott Horsley, thanks so much for joining us. Great to be with you. I'm Deepa Shivaram. I cover the White House. I'm Mara Liason, senior national political correspondent. And thank you for listening to the NPR Politics Podcast.

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