Non-MAGA Trump voters will soon lose patience

Trade wars and taking over the Kennedy Center won't lower prices. And people are starting to notice.

Photo by Nik on Unsplash

Here’s an assertion in which I have considerable confidence: At some point in the not-too-distant future, non-MAGA Trump voters (NMTVs) will begin to express something like the following:

Enough with the trade wars, renaming the map, and taking over the Kennedy Center. You said you’d improve our living standards by lowering prices and interest rates, and we’re not seeing it.

Where does that confidence come from? From plans unfolding in real time that will worsen inflation, raise key borrowing rates, and cut critical services to working-class folks to offset the costs of tax breaks for the wealthy. And for all this zone-flooding, there are no policies pushing the other way. Signs of precisely such discontent are already sprouting, and it is hard to see them not worsening.

Lower prices on Day One?

It is not surprising that Donald Trump quickly broke his promise to lower prices on Day One. Eggs are up more than a $1 per dozen since then; the retail gas price has ticked up; car and home insurance prices are also rising faster than average prices, and the 30-year fixed-rate mortgage is stuck at 7%.

Obviously, bird flu is driving up the egg price; energy prices are set in global, not domestic, markets. My experience, and I’ve lived this more than most, is that consumers have some patience for these facts but not a lot. And though MAGA voters are generally fine with Trump’s broken promises, as long as he’s sticking it to the libs, NMTVs will be less so. Morning Consult’s weekly tracker finds that “More voters than not still approve of Trump’s handling of the economy, trade and taxes, but his net approval rating on each of those three issues has fallen by 9 points since he took office.”

In other words, most people don’t (and shouldn’t) expect the president—even one who promised otherwise—to move prices and interest rates the minute they take office. But they can gradually sense whether he’s working on their behalf in this regard. And they’re not seeing that.

To the contrary, it’s starting to register with folks that Trump’s tariffs will raise their prices. It’s hard to find an economist who’d thinks otherwise, at least one who’s not being paid to think otherwise (here’s me and conservative economist Doug Holtz-Eakin agreeing on this point on Fox News, of all places).

The figure below shows why we’re concerned. It’s the most recent set of forecast scenarios for core PCE inflation—the gauge the Federal Reserve tracks most closely—from analysts at Goldman Sachs.

Source: Goldman Sachs Global Investment Research

The lines get higher, implying more inflation, as the tariffs pile on. Compared with a no-tariff scenario, if Trump follows through with all his threats, inflation could be close to a percentage point higher at the end of this year. Given all the bluffing, that worse-case scenario might be unlikely, but the point is that from the perspective of NMTVs who are waiting for promised price-relief, this pushes the wrong way.

The uncertainty you see in the figure regarding inflation’s path is likely to push the Federal Reserve to take its time in lowering interest rates, and that’s putting upward pressure on borrowing rates throughout the economy, including the 30-year mortgage rate.

Forthcoming “tax cuts”: More pain than gain

Then there’s their forthcoming tax package. The Republican House majority is working on extending the 2017 tax cuts, major parts of which expire this year. You might think a tax cut would raise households’ after-tax incomes, even if most of the breaks accrue to the wealthy, but that’s not what’s going on here. Because they’re extending the existing tax regime, it doesn’t change what anybody pays in taxes. True, many people’s taxes would go up in the absence of the extension, but nobody’s paycheck or bank account goes up because of this “tax cut.”

What does go up is the budget deficit, because our fiscal outlook reflects the law passed in 2017 that had most of the tax cuts expiring this year. How much the deficit will rise is unknowable at this point, as the Republicans are looking to partially offset the extension’s $4.5 trillion (over 10 years) price tag.

So how will this tax plan affect regular folks? It will hurt them, and “them” includes Trump voters, in two ways.

First, as the Center on Budget and Policy Priorities documented, offsets put forth by House Republicans could kick 36 million people off of Medicaid and 40 million could face the loss or reduction of nutritional support. Furthermore, Merrill Goozner pointed out that “20 of the top 24 states most dependent on federal funding to run their Medicaid programs voted for Donald Trump in the last election. Eleven of those states have more than a quarter of their populations on Medicaid.”

Bond market investors are already showing some concern about this worse fiscal path, and the way they show it is by demanding higher interest rates when they lend money to the government. Because the rates of government bonds serve as a benchmark for borrowing rates throughout the economy—think cars, homes, and credit cards—this is the other way tax cuts hurt average Americans.

In fact, there’s virtually nothing in the new administration’s flurry of activity that would help middle- and low-income families, and much that would hurt them. A good way to see this is to go to the New York Times Trump policy tracker and click on “Economy.” Other than the total nothing-burger of directing federal agencies to deliver “emergency price relief,” everything there goes the wrong way. Along with tariffs, there’s gutting consumer protections, promoting crypto currencies, ending subsidies for electric vehicles, and a “relentless assault” on workers’ rights to organize.

Go fast, break things

If you’re in the car with someone driving 120 mph, with the traffic cops looking the other way, you’d have to conclude that the likelihood of crashing is rising. There’s a real possibility we’re just a few reckless DOGE cuts and personnel firings away from retirees not getting their Social Security checks. Dean Baker correctly raised the specter of an escalating trade war (higher prices), a debt ceiling crisis (higher interest rates), a stock market crash (wealth destruction), or even the next pandemic (don’t even ask).

None of us wants any of that to happen. But some version of such outcomes is likely in our future, and the hundreds of millions of Americans hurt by them will not be the slightest bit assuaged by the Gulf of Mexico America.

Jared Bernstein is the former chair of President Joe Biden’s Council of Economic Advisers.

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