“Grocery prices have gone up.” “The housing market is insane.” “Inflation rates are skyrocketing.” These are all the claims we’ve heard over the past five or six years, and to be honest, these claims aren’t wrong. They’re just twisted to fit the narrative. Many of the people who complain about the state of America’s economy are the same people who refuse to look at the actual numbers that might back them up. Let’s be clear, I’m not here to bash one person’s idea of our economy or uplift another’s. I’m just here to explain how some of these things actually work in greater detail than others care to go into. Inflation, minimum wage, tariffs, and many other factors go into America’s economy, but many people just don’t understand them.
The economy is something that continually fluctuates. It is rare that a statistic about any specific aspect of the economy stays the same for two years in a row. What many people also fail to see is that when legislation of any kind is passed that would affect the economy, such as student loan relief, new tax cuts, or tariffs, it takes a long time, potentially a few years, for its effect to be seen in the general economy’s numbers. An example of this would be the economic impacts of the Covid-19 pandemic. One of its more prevalent negative effects was the soaring unemployment rates. According to the Congressional Research Service, the unemployment rate had been on a steady decline for over ten years until it peaked in April 2020 at 14.8% compared to 3.5% in February 2020. This was one of the initial impacts of the pandemic. Inflation, on the other hand, was a snowball effect over the course of a year. The Oxford Dictionary defines inflation as, “a general increase in prices and fall in the purchasing value of money.” Higher inflation basically means one can purchase less with a dollar. Obviously, the gas prices and grocery prices fell when no one was going out in public. The demand for it wasn’t near what it used to be. However, this also caused corporations’ profit margins to thin to almost nothing or negative. Because of this, when businesses and public places opened up again, they had to make up for lost profit, pricing everything higher than it had ever been. People were willing to pay the higher prices for these products, experiences, and services because they had been deprived of them for months. And because of this, America’s inflation soared from 1.2% in 2020 to 4.7% in 2021 to 8% in 2022 according to the Federal Reserve Bank of Minneapolis. It took years for the effects of the pandemic to be seen through the inflation rate, and that’s how it works in most cases.
Another issue at the forefront of people’s minds is the idea of putting tariffs on imported goods. Tariffs are basically another name for import tax, as it is just another fee put on the products imported to the U.S. President-elect Donald Trump has claimed that one of his major economic policies will be to put tariffs on imported goods from China, Mexico, and various other places, and he also claims that the countries importing these goods will pay the tariffs. He believes these tariffs will shrink the federal deficit, lower food prices, and have other various economic benefits overall. According to expert economists at the Peterson Institute for International Economics, these tariffs pose more of a threat than a benefit to the U.S. economy. Under their assumption that these countries would impose their own tariffs in retaliation to the U.S., it would take a percentage point off the U.S. economy and increase inflation by 2% by next year. Essentially, this would send the economy backward as inflation has slowly been coming down from its peak in 2022, and this would send it straight back up. In the presidential race, Vice President Kamala Harris’s campaign cited that Trump’s 20% universal tariff would cost the average American family roughly $4,000 extra per year. In basic terms, these tariffs would end up being paid for by the American people, different from the way it is being marketed by Donald Trump.
Overall, the economy has been a huge issue for everyone from the 2008 recession to the 2020 pandemic. Inflation rates and gas prices will continue to fluctuate like they always have, and no economic policy is going to entirely fix that. It’s important to understand how these things might affect middle-class and working-class citizens, as they seem to see the most impact from these types of legislation. Hopefully, in the coming years, the inflation rates will continue their decreasing trend and the cost of living will come down, however with many of the plans and proposed bills by President-elect Donald Trump, that might not be the case.
