Trump’s Confident Claims on Taming Inflation (Image Credits: Assets.realclear.com)
President Donald Trump has proclaimed success in addressing affordability concerns, yet economists highlight how his administration’s policies erode household incomes at a faster pace than they curb rising costs.[1][2]
Trump’s Confident Claims on Taming Inflation
During his recent State of the Union address, Trump asserted that prices were plummeting and that he had effectively won the battle over affordability. He dismissed past concerns as a hoax and claimed the issue had vanished. Such statements came amid a backdrop where inflation had indeed moderated, dropping from 3.0 percent at the end of the prior administration to just over 2.6 percent in the first year of his second term.[1]
Progress on prices slowed compared to the sharper decline seen previously, from 8.0 percent to 3.0 percent over the last two years of the Biden era. Economists point to specific policy choices as factors stalling further reductions. For instance, the rollback of renewable energy subsidies led to surges in electricity prices. Tariffs imposed on pharmaceuticals, following earlier tax incentives for offshoring production, also drove up costs.
Policies That Actually Raise Living Costs
The failure to extend Affordable Care Act subsidies resulted in higher premiums for millions, as healthier individuals opted out and left sicker enrollees in the risk pool. This change not only inflated insurance prices but also increased out-of-pocket expenses for families. The Republican tax and spending package, dubbed the One Big Beautiful Bill Act, loomed large with planned cuts exceeding $1 trillion to Medicaid and SNAP over the next decade.
These reductions effectively stripped income from vulnerable households, exacerbating affordability strains for the bottom 40 percent of families. Federal workforce reductions and chaotic trade approaches further chilled investment and consumer spending, indirectly pressuring prices upward in sectors like housing and energy.[2]
Incomes Under Pressure: The Core Issue
Affordability hinges on the balance between wages and prices, and here Trump’s agenda drew sharp criticism from EPI Chief Economist Josh Bivens. He argued that for typical families, these policies guaranteed harm to incomes far exceeding any price relief.[1] Real wage growth slowed in 2025, with outright declines for low-wage workers, as the labor market cooled.
Factors included mass deportations disrupting complementary labor forces, federal job cuts totaling nearly 290,000 positions, and tariff volatility freezing business investments. Sustained low unemployment, crucial for wage leverage among lower-paid workers, eroded under these measures. Even a boom in AI-related spending masked broader weaknesses in non-AI investment.[2]
Inequality Amplifies the Affordability Crunch
The administration’s moves intensified income disparities, a key driver of eroded purchasing power for middle- and lower-income households. The megabill tilted tax cuts toward the wealthy while slashing supports for the poor, quadrupling the pace of inequality growth seen over decades. Assaults on union rights and labor standards suppressed bargaining power, funneling gains upward.
- Federal workforce cuts weakened enforcement against corporate power abuses.
- Deregulation in finance and crypto exposed workers to risks without wage protections.
- Immigration enforcement deterred organizing efforts, keeping pay down.
- Budget shifts added trillions to debt, crowding out private investment and future growth.
- Over 47 documented actions in the first year undercut worker security and job creation.
These steps slowed potential economic output, with estimates suggesting drags from deportations, R&D cuts, and higher interest rates could shave productivity growth significantly.[3][2]
Key Takeaways:
- Policies risk recession by curbing demand, slowing wage growth more than inflation.
- Supply-side damage from cuts and tariffs erodes long-term incomes.
- Inequality spikes leave typical families $40,000 poorer annually versus equal growth.
Trump’s affordability narrative overlooks these income dynamics, where slowed growth and unequal distribution pose greater threats than residual inflation. Families continue grappling with squeezed budgets despite modest price easing. What steps would you prioritize to truly boost household affordability? Share your thoughts in the comments.