The crisis Trump built — And no one can quickly solve

It seems to be universally understood that the singular issue at top of mind in the approaching midterm election is affordability. Two related but distinct concerns underlie that issue: high prices and the rate of change of prices (i.e., inflation). It’s important to recognize a distinction between the two, as the policy remedies differ for the respective concerns. It’s one thing to roll back prices of particular goods. It’s quite something else to lower inflation, which pertains to price changes more broadly.

The most immediate action that could be taken to reduce prices would be to eliminate the broadly instituted tariffs that Trump has imposed. The fact that this action has not yet been taken is nothing short of crazy. By the stroke of a pen, this move would reduce prices paid by U.S. businesses and consumers on a host of imported goods. It’s about the lowest hanging fruit that we could ever expect to see. Virtually every other action taken expressly to lower prices would rely on stimulating supply in particular markets; but, for the most part, the consequent reduction of prices would occur only after increased supply hits the market, which, depending on the market in question could take months or even years to occur.

Revoking Trump’s tariffs would also have a mitigating impact on the pace of inflation. Feedback in the other direction doesn’t work so well. That is, while taking steps to reduce prices paid by businesses and consumers may serve to reduce inflationary pressures, we can’t expect lowering inflation to necessarily foster a rollback of prices. Consider energy prices, which may be the single set of prices of greatest concern. In this sector, the current, high market prices we’re paying largely derive from supply chain disruptions stemming from military activities in the Middle East and in Russia/Ukraine. As these wars continue, it seems folly to expect material expansion of fossil fuel production to commence any time soon. Additionally, Trump’s widespread dismantling of alternative energy development projects certainly hasn’t helped. In any case, we shouldn’t expect success on the inflation front to end up causing energy price increases to move lower.

The Fed is in a tough spot. In his public statements, Chairman Warsh has prioritized achieving the 2 percent target rate of inflation, which suggests to me that we shouldn’t expect any imminent reduction of interest rates. At the same time, expensive credit certainly constrains the prospect of expanding energy production. And while that second concern falls beyond the Fed’s direct jurisdiction, it’s nonetheless a part of the calculus that the Fed must consider.

On the other side of the policy street is the Administration. (Ordinarily, I’d say Congress and the Administration; but in the current circumstance Congress has largely abrogated its responsibility, effectively rubber stamping or acquiescing to all of Trump’s policy initiatives.)

The upcoming midterm elections should be a vote on Trump, just as he is suggesting. Moreover, the affordability issue shouldn’t be the driving issue of the coming election, as neither party has any capacity to address this concern in a meaningful way where meaningful relief would come in the near term. While I think it’s fair to place much of the responsibility for the affordability crisis on Trump’s shoulders, at this point, the Democrats shouldn’t promise to solve this problem in the near-term, as any remedy is likely to take years to accomplish — too far away for Democrats to make any promises. Solving the affordability crisis in the near term is simply beyond Congress’s capability.

To my mind, the most critical question to be sorted out by the election is this: Does America want the status quo, where our policies derive from an authoritarian president who, in his own words, “can do whatever he wants?” Or do we want to disabuse this president of this notion by electing a Congress that will retake its power of the purse and check the President on his ill-considered and destructive instincts — instincts that have exacerbated the affordability crisis and upended the world order. Advice to the Democrats: don’t over promise.