In response to growing public concern regarding his handling of the economy, US President Donald Trump has rapidly introduced a series of proposals aimed at addressing consumer worries. Despite having previously dismissed concerns about the cost of living, Trump has shifted his focus on economic issues following disappointing results for the Republican Party in recent off-year elections across several states.
One of Trump's standout proposals is to provide most Americans with a $2,000 subsidy, which he claims would operate similarly to a rebate derived from federal revenue generated by his tariffs on foreign imports. While the intention behind this idea is clear, economists like Erica York, vice president of tax policy at the non-partisan Tax Foundation, warn that the tariff revenue is insufficient to fund such a rebate plan. To put it into perspective, the minimum cost of this proposal, assuming a cutoff of $100,000 in annual income, could reach approximately $300 billion, which would exceed the total tariff revenue collected thus far.
York further cautions that these tariff refunds might inadvertently drive up prices within the American economy, echoing the dynamics seen with stimulus payments during the Covid-19 pandemic. As she explains, distributing large sums to households could lead to increased consumption rather than savings, resulting in more dollars chasing limited goods.
On a related note, Treasury Secretary Scott Bessent recently downplayed the likelihood of the proposed payments, suggesting that the revenue from tariffs would instead be reflected in lower tax rates for Americans in the upcoming year, as part of Trump's 2025 Big, Beautiful Bill spending package. This bill was passed by Congress in July and aims to reshape the economic landscape.
Exit polls from last week’s elections revealed that concerns about the economy were paramount for American voters. Candidates like Zohran Mamdani, who focused on affordability in their campaigns for New York City mayor, and others in Virginia and New Jersey, mirrored the public sentiment, emphasizing the electorate's growing dissatisfaction with Trump's economic management.
Trump has also proposed promoting 50-year mortgages as a way to enhance home ownership accessibility. However, this proposal has met with skepticism from various members of his own party, including Republican Congresswoman Marjorie Taylor Greene, who argues that this could primarily benefit lenders while placing a heavier burden on consumers in the long run.
In an additional attempt to alleviate economic pressures, Trump suggested converting expiring government health insurance subsidies into direct cash payments, allowing consumers greater flexibility in negotiating their insurance. This proposal, like many others, would require congressional approval, a challenging feat given the narrow Republican majorities in both chambers.
Trump has also floated more modest measures to tackle rising costs, such as a federal investigation into beef prices and negotiations with pharmaceutical companies to lower prices for obesity drugs for uninsured individuals. According to York, the administration appears to be testing various ideas to gauge public response, a strategy Trump has successfully employed in the past.
Despite these attempts to recalibrate his policies, some of Trump's actions may undermine his efforts to connect with public sentiment. For instance, he continues to assert that prices are decreasing, a statement that holds true for some products but not for others, such as beef and electricity.
As Trump navigates these challenges, he faces a situation reminiscent of the struggles experienced by Joe Biden’s administration, which attempted to downplay economic concerns while the cost of living surged. Currently, inflation under Trump stands at 3%, significantly lower than the peak of 9.1% seen under Biden, marking a stark contrast in economic narratives as the 2024 presidential campaign approaches.
With the Republican Party eager to avoid a repeat of past electoral failures, Trump's ability to connect with voter concerns will be crucial in shaping the political landscape leading up to the next elections. For continued updates on Trump's policies and their implications for the economy, subscribe to North America correspondent Anthony Zurcher's weekly US Politics Unspun newsletter.