In the
UK, it’s contributed to “consumers addicted to ‘financial doomscrolling’ fuelled by economic angst”, according to a recent
survey by FIS. In the
US, it’s marked by an electorate feeling
‘shakier’ about the economy and licking their wounds from previously soaring post-pandemic prices across nearly every buying category. What are we talking about? Inflation.
Known the world over for its huge impact on elections. Voters in almost every country always place economic concerns at or near the top of their priorities in choosing which candidate to support, and this is especially true when the decision is for executives
on a national level; as in the prime minister and their party in parliament in the UK, together with the Bank of England, and in the case of the US president, affiliated party and their policies on economic matters – many of which are managed by a semi-independent
Federal Reserve and other cabinet officer appointees.
What typical goods and services cost a household voter now, in the past, and what it looks like they will cost in the near future, are always major determinants of the success or failure of office seekers. This is true even though, as is usually the case
with pricing of most products and services, the decisions (or non-decisions) made by elected officials often have little or nothing to do with the actual costs of living in a particular society.
Supply chain, demand, and numerous production and distribution factors and expenses, sometimes with taxes and tariffs coming into play, are the principal determinants of higher or lower prices more so than government policies. Of course, trade barriers can
raise prices of select items, as former president Trump threatened to impose while previously in office and again has proposed to place on many categories of goods coming from China and other countries deemed “unfair” to US competitors. Higher wages can increase
prices as well, as it obviously costs more to deliver a product or service if people producing them are receiving higher salaries.
Paradoxically, if too high a percentage of those higher costs for employees are passed on to consumers or business customers or by their own suppliers, the cycle of inflation might just continue upward and minimise any potentially positive outcome of higher
pay for individual employees and households. It can also lead to greater uncertainty and concerns (along with the costs) for individuals or businesses trying to plan and manage their expenses or expansion into the future.
As Finextra outlined in a previous
story on interest rates, statistics, and influences on household and business expenses, savings and borrowing costs are always predominant issues for political debate. They often are used in attempts to assert advantage and claim superiority over the competition.
This is true even if the parties in question have no clear policies outlined for addressing inflation, interest rates, or other economic factors in their platforms.
In the US, the Republican party - now challenging (via Donald Trump) for the presidency held by Joe Biden and the Democrats - has not released any set platform yet nor did they do so during Trump’s first term. This may not change by the time of the Republican
party’s national convention 15-18 July in Milwaukee, Wisconsin.
The Democratic party’s policies on inflation are largely in step with and reflected by the actions of president Biden over his term of the past three and a half years, and while the
results of his administration’s policies (beyond political claims to the contrary) are mixed between positive and negative in some categories (like unemployment, economic growth, and inflation), the American people are statistically better off now by many
measures than they were when Biden started his term during the latter part of the global pandemic.
Trends are also pointing toward lower inflation, as prices have already begun to rise much more slowly than in 2021-22.
With interest rates expected to decrease slightly due to likely Federal Reserve
action sometime before the election in November, and with huge infrastructure spending bills and the climate change, sustainability, and resilience-focused
Inflation Reduction Act now pouring many billions into renewable energy and similar projects all over the country (notably a significant portion of these funds are being spent
in traditionally 'red' or Republican party-leaning
states like Texas and Florida where politicians have complained about the act’s costs), Americans should be seeing some ‘light at the end of the tunnel’ when it comes to the cost of living. But instead, there is a persistent sense in polls and in the news
that they feel they might be better off under a new administration.
Inflation and interest rates are already showing signs of improving, and employment, at least by traditional measures, is already at its highest level of growth in the past
50 years. Just as with the sentiments found in the FIS study, it would be wise for voters to look beyond the hype and understand the numbers to determine if they really are better or worse off, or will be, under incumbent or challenging political parties
and leaders.