The specific things that were constrained could come down - such as oil if the Iran war ended and the all the damage was undone. But inflation has spread from shocks in specific markets into most other areas of the economy.
We’ve had inflation over 3% for about 5 years. Even in the shorter term with Trump’s tariffs they’ve contributed to systemic inflation, not just a one time increase when the tariffs kicked in. Wage growth has coincided with those increases.
It’s easy to say businesses should put the genie back in the bottle, take less profits and just put the prices back down. But that would also mean pushing wages back down.
It’s OK because we don’t need to do this. We can bring down inflation caused by tariffs, the Iran war etc and promote wage growth so people can afford what they could afford previously and more.
Other thing is the shocks from Iran will be felt for a long time even if the war ended today and all shipping attacks ended.
It’s going to take years to rebuild the refineries and it’s going to take longer for shippers to be confident that shipping through narrow waterways in the middle east is as safe as they thought before. Someone is going to have to pay more to a shipper to move goods through the same trade routes.
They will eventually come down but probably not all the way right away.
Costco, for example, announced that they got a refund on tariffs and will immediately lower prices in response.
That’s good PR, and might lead to more business as excited customers come in large volumes to take advantage.
But some other businesses might take a different tack. Let’s say you were selling a pack of cigarettes and due to tariffs had to bump it up from $10 to $15. Your nicotine-addicted customers kept buying them regardless. Now the tariffs are gone… So you can drop it back down to $10 a pack, or keep charging $15 and enjoy the extra profits.
Though in time it will almost surely drop. Brand X drops their price to $12, and your sales plummet, do you drop yours too to get that business back. The nature of capitalism tends to self-regulate to a certain extent as long as legitimate competition is happening and you don’t have companies colluding on keeping prices high (which is of course illegal).
That’s some optimism right there; I wish I shared it. Putin seems (more?) committed to the war in Ukraine. I don’t know that our declaration of 100% support for Ukraine is going to matter much to him.
Belgium recently refused to release $80B of frozen Russian assets to benefit Ukraine. Instead, they sent Ukraine 3 F16 jets. Ukraine could have bought those fighters and more if they had the money. Despite the continued happy talk from the EU regarding support for Ukraine, 100% commitment ain’t happening.
An important question for Dems is how much should they want to improve the economy when Trump will take credit for every win. I don’t think it’s controversial to say Dems made a mistake securing a stimulus in 2020 to help save the economy, when Trump just used it as an opportunity to put his name on the checks.
Respectfully, nah. Sure, there are shortages of some things, but not everything. Merchants have inflated prices lately because they can. That “competitors” appear to be in lockstep regarding pricing, supports the allegation of collusion. Government price fixing seems to be a lot of people’s answer to the problem–for gas, for rent, and such. But I think the real/better answer is to enforce the antitrust laws we already have on the books. Bust the monopolies, and make violations actually hurt the people responsible for them. Essentially, if you disincentivise the bad behavior then the opinions, experience, and choices made by the marketplace will matter again. Also, if profits are taxed more highly, wage increases and better benefits will follow naturally–may as well reinvest in the business if the government’s going to take the money otherwise.
To reframe that question: How much do the Dems want to stay in power and how much do they want to actually help people get out of this mess? Which will they choose?
Well I hope they would have the integrity to choose the latter. And if we’re lucky it will keep them in power.
I have very little faith in the Democratic party, which is, to be clear, my chosen party. But I think stopping the Tarrifs and the war would do a lot of good - everyone hates those. And they could do those things pretty easily.
They would then have to earn the right to stay in power. I’m less optimistic about that.
[tinfoil hat ON]
Maybe because gas prices are the favorite topic of the media when they want to bash a politician, so the vendors get more direct pressure to play nice? I never claimed to be an economics professor, I just think trusting merchants to be fair and do the right thing is naivte of the highest order.
[tinfoil hat /OFF]
I’m 1000% in support of Ukraine but, realistically, if we fully back Ukraine, part of the only realistic path to get Russia to back out of the war is to keep striking Russian oil and gas facilities. Which will make fuel prices go (somewhat) higher in the short term.
Still totally worth it, but it won’t lead to a decline, at least not for now.
That’s the kind of game I would expect from Republicans and is part of why I am no longer one.
There’s a big risk that bad Trump economic policies this presidential term will not crash the economy until the next term, when I suspect there will be a Democratic president. So if by some miracle congressional Democrats can actually make a positive economic contribution over the next two years, they should do so – both because it the right thing to do, and also because it will, likely as not, be good politics.
Then the way for the Ds to beat this problem is to propose all kinds of things that would improve the economy, knowing full well Trump will veto the bills.
Is there anything, aside from a stimulus, that the Democrats could propose that Trump would agree to?
Frankly, anything that they would propose – short of things which directly benefit Trump, or glorify him (which I would not expect them to propose) – I’d expect him to oppose out of pure spite and hatred.
If Democrats proposed renaming the nation’s capitol to Trump, DC I expect he’d be suspicious but eventually agree.
Don’t forget that during the Biden administration, Democrats tried to impose stricter border controls. Republicans were on board until Trump told them not to because he didn’t want Biden to get a win, so they defeated a measure that would have actually advanced their own policies. Spite is a very strong motivator for Trump. He is totally the Scorpion in “The Scorpion and the Frog”.
From what I understand, at least in America, consumer gas pricing is a loss leader for gas stations. Lower prices get people to choose their store, and then come in and buy beer, cigarettes, pop, candy and other snacks, which is where they make their money. Those prices inside the store have gone up and will stay up. The price outside on the sign will come down as soon as gas costs less for the station to buy, because the price outside on the sign is a big advertisement for you to stop and get other stuff.
Source: My partner’s family was in the gas station business.
