Comment: To understand why Democrats lost, look at wages

By Kathryn Anne Edwards / Bloomberg Opinion

Exit polls from last week’s U.S. elections showed that the economy was at the center of the decision among Americans on who to vote for. Just how well the economy performed under President Joe Biden has been a fiercely debated topic. But the truth is that whoever is occupying the Oval Office either gets too much credit or too much blame for the how the economy has performed.

And yet, polls show that a major reason why Vice President Kamala Harris lost to former President Donald Trump was because of the spike in inflation rates in 2021. Lost in the debate about who or what was the cause of the surge in consumer prices — Disruptions to the global supply chain? Too much government spending? A central bank that was slow to tighten monetary policy? — was that a political problem five decades in the making was exposed.

To understand why Americans took out their frustrations around inflation at the polls you first need to understand that the bottom 60 percent of workers saw a real, or inflation adjusted, wage increase of only around $3 per hour between 1973 and 2023. (Hourly wage data are from the Current Population Survey Outgoing Rotation Group. Workers include all wage and salary workers 16 or older, which excludes the self-employed, and wages are adjusted for inflation using the Consumer Price Index for All Urban Consumer Research Series. The data was prepared by the Economic Policy Institute.)

So as inflation spiked, large swaths of American households that already felt like their standard of living was diminished suddenly found themselves falling even further behind. This is a problem that can’t be fixed in a single presidency, and given the economic policies Trump has proposed, it likely won’t be addressed in his presidency.

In this environment, prices of goods and services that grow with or slower than inflation can be afforded but prices of anything that rise faster than inflation become further out of reach. Prices for clothing, appliances, household furniture, toys, recreational activities, TVs, smartphones, computers, cars, for example, have lagged behind inflation, becoming relatively cheap thanks to the globalization of trade and technological advancements. The opposite is true for things such as housing, medical care, education and child care. Food joined that group in 2021. Many Americans are winning the small game and losing on the essentials.

Addressing the deterioration in living standards made acutely salient by inflation requires attacking the problem from all sides. We need policies that foster increased wages for workers, address the affordability of essential goods and services, and invest in the economic security of households. But Trump is unlikely to pursue any of them. The three pillars of his economic platform are to institute tariffs, deport immigrants and extend the 2017 Tax Cuts and Job Act that the Committee for a Responsible Budget says will add $4 trillion to the budget deficit. The first two, to the extent he pursues them fully, will spur inflation and hurt key industries, either by increasing their input prices or decreasing their workforce.

We know extending the TCJA, which permanently lowered tax rates for companies and temporarily lowered tax rates for high income households, won’t help raise real wages, won’t make home ownership more affordable and won’t make child care affordable because none of its four predecessors, in 2001, 2003, 2012 and 2017, did.

Conservative thinkers have long been hostile to the idea that households are struggling. The Heritage Foundation wrote in 1990 that America’s poor aren’t actually poor because they have consumer goods like microwaves and receive Medicaid. The group pushed the same argument 30 years later, citing smartphones instead. The American Enterprise Institute reports that, contrary to popular belief, the gap in incomes between the rich and poor has not increased and that incomes haven’t stagnated. And yet it is Americans’ anger and frustration with how great they are not doing that propelled Trump back into the White House.

Trump may be unrivaled in American history in his ability to tap into this anger and frustration anger, but he has offered no policy or proposal that will help. Slapping tariffs on imports from Mexico may provide a sort of dopamine hit for Americans who don’t like how many immigrants have crossed over the southern border, but it won’t make groceries cheaper, especially not the $40 billion of food that the U.S. imports from Mexico.