What do you think about inflation? Right?
Most Americans think inflation is too high. But different people think about inflation in different ways, and these quirks of human psychology could shape the outcome of this year’s presidential election.
Inflation is clearly a big concern for voters. The annual inflation rate peaked at 9% in 2022, and has since declined steadily to return to a near-normal 2.4%. But while prices have increased a cumulative 20% since President Joe Biden took office, incomes have only increased by 18.1%. During President Biden’s term, the typical worker has lagged slightly behind.
When Donald Trump was president, inflation rose just 7.6% in October, his fourth year in office. Income increased by 13.5% during the same period. In other words, the typical worker was rising through the ranks. This is the simplest way to explain why some voters think the economy is better under Trump.
This matters now because voters need to decide whether they would rather spend the next four years under a Trump administration or with Vice President Kamala Harris, who is shouldering the burden of Biden’s inflation surge. Because there is. And it could all focus on how a handful of swing state voters in seven battleground states think about inflation.
Read more: Trump vs. Harris: 4 ways the next president could affect your bank account
Forecasting firm Oxford Economics runs an election model based on each state’s economic conditions and past election patterns. A stable, growing economy like the current one is usually bullish for the incumbent party, in this case Kamala Harris’ Democratic Party. But inflation is a crooked cog that disrupts the electoral system.
This combination of images shows Republican presidential candidate Donald Trump and Democratic presidential candidate Kamala Harris at separate election events on October 23, 2024. (AP Photo/Alex Brandon, left, Matt Rourke, File) · ASSOCIATED PRESS
Oxford explains inflation in two ways. One is the “sticker shock” model, where voters are still shocked by the cumulative price increases of the past three years. In this model, Trump won six of the seven battleground states (Georgia, North Carolina, Pennsylvania, Wisconsin, Arizona, and Nevada), but Harris won only Michigan. It was only the state. Trump won the presidency with 297 electoral votes.
Another model is based on a “misery index,” or the sum of the unemployment rate and the inflation rate. The current misery index of 6.5 is low by historical standards as the current inflation rate (2.4%) and unemployment rate (4.1%) are both in the green zone. The misery index has averaged 9.2 since 1948 and 8.3 since 2000. During the same period during Trump’s presidency, the misery index was 8. So by this measure, Biden’s economy is doing slightly better than Trump’s economy was a month before the election.
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According to the Oxford Misery Index model, Harris won North Carolina, Pennsylvania, Michigan, Wisconsin, and Arizona, and came out on top with 281 electoral votes. In each outcome, the races were surprisingly close, with votes in Pennsylvania and Wisconsin decided within 0.3 percentage points.
Which model applies? Do you know? “It is difficult, if not impossible, to know which model most accurately captures the level of voter dissatisfaction,” Oxford acknowledged. The misery index model has historically produced better results, but the sticker shock model probably fits millions of low-income voters better.
Other election models provide even less clarity. Moody’s Analytics’ election trends show that Harris has a narrow lead due to lower gas prices and slightly lower mortgage rates. The RealClearPolitics voting average is a statistical tie. Betting markets are favoring Trump, but that’s not the same as opinion polls and may overstate the odds of Trump’s victory.
There is an implicit logical fallacy in the large role inflation will play in the 2024 election. In other words, past performance has nothing to do with future results. Trump did nothing special during his presidency to keep inflation low. He simply took office at the end of a long period of disinflation that ended in 2020 with the coronavirus pandemic and massive stimulus checks approved by both parties. Aside from signing the fourth of four large stimulus bills, Biden did nothing special to worsen inflation.
There’s also some irony. President Trump’s plan to impose new tariffs on $3 trillion worth of imports is inherently inflationary because tariffs are taxes that raise prices. As a result, many economists believe inflation will be higher under the Trump administration than under the Harris administration. By contrast, Team Biden has been so politically damaged by inflation that Harris and other Democrats may be instinctively reprogrammed to prevent inflation from threatening them again. do not have. If they had a chance.
Rick Newman is a senior columnist at Yahoo Finance. Follow him on X @rickjnewman.
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