The cost of living and inflation are major threats to the political fortunes of the Republicans in the majority in Washington. But what can President Donald Trump do now to help the situation ahead of the midterm elections?
Recent polling and off-year elections last week that saw Democrats surging indicate that voters are unsatisfied with the state of the economy and the increase in prices in recent years. And it is limited, but the White House has some options on the table to lower the cost of living.
REPUBLICANS AVOID TARIFF RETHINK DESPITE VOTER DISCONTENT WITH INFLATION
Still, there is no magic bullet when it comes to price growth. Some of the options to help with inflation would raise new political problems, and some run counter to other policy goals of the administration. And other options are challenging to pull off at the federal level alone.
The backdrop
Inflation rose a tenth of a percentage point to 3% for the year ending in September in the consumer price index, the Bureau of Labor Statistics reported last month. That is the most closely watched inflation gauge. Notably, it is higher now than a year ago.
Still, inflation is far from its peak under former President Joe Biden. Inflation has gradually decreased from the peak of about 9% in 2022.
And while 3% inflation might seem manageable for consumers, they might feel the increases more cumulatively. Prices are up nearly 10% over the last three years.
Last week’s elections further showed that voters are not happy with the cost of living. Polls showed that the economy was the No. 1 issue in Virginia, where Democrats won statewide elections easily, and the cost of living was by far the top issue for voters in New York City.
So what can be done?
Tariffs
Sweeping tariffs have been a fixture of Trump 2.0. The president unleashed tariffs across the globe designed to reshore U.S. manufacturing, create jobs, and build American self-sufficiency.
But many economists say they are also raising the cost of living.
Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner that, in his view, the first order of business if the administration wanted to help with the cost of living would be to roll back some of the tariffs, although he acknowledged that isn’t what the Trump administration’s mindset is right now.
“That’s sort of the low-hanging fruit in this world where there aren’t a lot of great options to try to bring inflation down,” Hamrick said.
Grocery prices, in particular, have caused consternation for consumers. The administration has worked to emphasize the food items that have gone down in price in recent months — for instance, by claiming that the costs of certain Thanksgiving spreads have fallen and highlighting that gasoline prices have dipped.
But costs are up for other grocery items. Meat, poultry, and fish prices, on average, are up 6% over the past year, according to the CPI. Ground beef is up nearly 13%. Some vegetables, such as lettuce, are rising in cost faster than overall inflation, for instance, while other vegetables, such as tomatoes, are below the rate of inflation.
Certain foods are also being hit harder by tariffs. For instance, because of U.S. trade policy, Italy’s biggest pasta exporters are reportedly preparing to stop shipping to stores in the U.S. as soon as January. Tariffs on other specific foods that aren’t mass-produced domestically, especially coffee, could also trickle through to consumers in the form of higher prices.
The most recent inflation report shows that coffee prices have shot up a blistering 18.9% over the past year. Banana prices are up nearly 7% in the 12 months ending in September, according to the same report.
And many voters are equating tariffs with inflation. A recent ABC News/Washington Post/Ipsos poll found that 63% of people think tariffs add to inflation, and a majority of those surveyed say they hurt their families’ financial situations.
Interest rates
The Federal Reserve has perhaps the most institutional influence on inflation of any part of the government. It is charged with managing the money supply and keeping inflation low, which it does in large part by setting targets for interest rates.
But interest rates are a double-edged sword, affecting inflation and the cost of living. The Fed can try to slow inflation by raising its target interest rate, which in turn is meant to slow overall spending in the economy by raising interest rates on mortgages, auto loans, business loans, and other forms of credit.
But that can be painful medicine if, in the near term, households feel like they are getting squeezed by higher rates on their home loans and credit cards.
Indeed, the Trump administration is pushing for major rate cuts to provide relief to people looking to finance a new car or purchase a home.
But the trade-off for those lower interest rates could be a surge in inflation for things such as groceries and other goods and services.
“What’s kind of weird is he’s putting pressure on the Fed to cut interest rates, which would push inflation higher,” Desmond Lachman, a senior fellow at the American Enterprise Institute, told the Washington Examiner.
Lachman said that the political pressure Trump has put on the Federal Reserve has the effect of pushing long-term interest rates higher and making the situation with mortgage rates worse.
“So if you ask what he can do, one of the things that he could do is back off on beating up on the Fed,” Lachman added.
Tariff checks?
Over the weekend, Trump pitched the idea of $2,000 dividend payments from his sweeping tariff regime. Such a measure, on its face, could provide people a bit of a pressure valve for the cost of living.
“A dividend of at least $2000 a person (not including high income people!) will be paid to everyone,” Trump said on social media.
But Ryan Young, a senior economist at the libertarian Competitive Enterprise Institute, said that, in the long term, cutting checks to tens of millions of people will only make inflation worse. It would juice demand for goods and services, causing inflation to rise.
“It might provide some short-term relief, but at the expense of long-run price increases,” Young told the Washington Examiner.
Housing
Members of both parties see a need for more housing supply in the U.S. Home prices have risen to levels that have put buying out of reach for many working-class and middle-class people. The median age of a first-time homebuyer in the U.S. is now 40.
The administration could pursue initiatives to encourage state and local governments to build more housing supply or reduce permitting and regulations surrounding home construction.
For instance, the ROAD to Housing Act of 2025, authored by Senate Banking Committee Chairman Tim Scott (R-SC) and the top Democrat on the panel, Massachusetts Sen. Elizabeth Warren, passed the Senate last month and awaits House consideration.
TRUMP TICKING OFF CAMPAIGN PROMISES, BUT PESKY ISSUE OF INFLATION STILL ELUDES HIM
The bill would rework the federal government’s role in housing and focus on expanding the housing supply, which would help with affordability.
Young pointed out that most of the issues related to zoning and permitting come at the state and local levels. The bill would add some incentives for state and local governments to help with housing supply and affordability by lessening land use rules.