Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version was published in Project Syndicate.  

---

May 31, 2026 — Political leaders find it difficult to deal with inflation.  Even in those cases when incomes rise faster than prices, voters complain bitterly about inflation’s effect on them.  Even when inflation occurs throughout the world, the public in each country holds its own politicians responsible.

And even when an individual country is indeed subject to unusually high inflation, there is often little its leaders can do about it.  The most salient policy lever at the government’s disposal, insuring tight monetary policy, takes time to show up in inflation numbers, and usually comes at the cost of lost output and employment.

1. The affordability crisis

All the more striking then, that Donald Trump has gone out of his way to take steps that are making US inflation worse than it has to be.  This, in stark contrast to his campaign promise of reducing it from his first day in office.  (Actually, he campaigned on a promise of lowering the price level, which would require holding inflation below zero for a while.)

Most recently, the 12-month CPI inflation rate jumped to 3.8% in April, compared to 3.3% in March.  The 12-month PCE inflation rate did the same.  Looking at the most recent two months alone, the CPI rose 1.5 % in March and April, which works out to a disconcerting 9 % at an annual rate.   It is not generally advisable to focus on statistics for one or two months alone, because they are so volatile.  But the inflation trend within the last 12 months is clearly upward.

Inflation was also high under Joe Biden, peaking at 6.5 % during 2022, as the post-Covid recovery ran into supply constraints everywhere in the world.  At least in the Biden years, wages kept up with prices.   [Jan 2025 wage/Jan 2021 wage: 30.79/25.16 => 5.0 % per year.    Jan.2025 CPI/ Jan. 2021 CPI: 317.7/ 261.6 =>  4.9 % per year.]  Under Trump, by contrast, real wages have fallen.  Average hourly earnings rose by 3.7 % over the year April 2025-April 2026 in dollar terms; subtracting the 3.9 % increase in prices yields the implication that real wages fell by 0.2 %.

We are all experiencing the sticker shock from inflation.  It has become known as the “affordability crisis.”

Democrats in the November congressional elections want to run on a slogan of affordability. They can do so under an honest platform of specific anti-inflation policies, which neither party offered in the 2024 election: 1) rolling back Trump’s tariffs, 2) reversing the Trump lurch to higher energy prices, 3) restoring the independence of the Federal Reserve, 4) halting runaway fiscal profligacy, and 5) alleviating the shortage of workers in housing and other immigrant-intensive sectors.

2. End inflationary international policy

First, almost everyone but Trump and his sycophants knew that his tariffs would raise prices paid by consumers for imported goods and their domestically produced substitutes.  About 90% of the costs from the tariffs imposed in 2025 was paid by U.S. importing businesses and households.  Only 4% was paid by foreign exporters in China or elsewhere.  True, US businesses have absorbed more of the cost than US consumers, so far.  But, even so, the tariffs had added about 0.7 % points to the CPI just by September 2025 alone. (More is likely to follow.) These tariffs can be reversed as soon as the Democrats take back the Congress.  Indeed, many of Trump’s tariffs have already been ruled unconstitutional by the courts.  So, it may just be a matter of discontinuing White House attempts to keep the tariffs in place.  Tariff liberalization would, in itself, put a dent in inflation.

Second, undoing the tremendous damage wrought by Trump’s foolish war on Iran will be more difficult. This holds politically, fiscally, and humanly.  The hostilities in the Persian Gulf, particularly the closing of the Strait of Hormuz, have been the biggest shock to oil prices since 1979, if not longer.  Energy costs jumped 17.9% over the last 12 months, driven by gasoline (28.4%) and fuel oil (54.3%). We probably will  not see $60 a barrel oil again for quite a while.

But Trump has raised the cost of energy in other ways as well.  He is waging war against cheap solar and wind energy.  This can be reversed.

3. End inflationary macroeconomic policy

Third, the lever most associated with inflation is monetary policy.  Economists have long warned that compromising the Fed’s independence would rEven when Andrew Jackson set about undoing the Second Bank of the United States, I don’t think it occurred to him to file criminal charges against Nicholas Biddle.

Fortunately, the current Fed has stood firm, with Jay Powell continuing to show great integrity and courage in staying on as a voting Governor despite Trump’s failure to follow past practice and re-appoint him as Chair.  Further, Governor Lisa Cook has not surrendered to the administration’s flagrantly illegal attempt to remover her.

Will Kevin Warsh, the new Chair confirmed by the Senate May 13, give Trump the lower interest rates he demands, even if at the risk of pushing inflation further?  On the one hand, it would be nice to give Warsh the benefit of the doubt.  “Innocent until proven guilty.”  I suppose it is possible that he will unexpectedly exhibit Thomas à Becket syndrome, emulating the friend of King Henry II who was appointed Archbishop of Canterbury in 1162 but then subsequently switched his loyalty to the august institution for which he had become responsible.  On the other hand – a more likely hand — Warsh may follow Trump’s wishes.  He will be like one of those Supreme Court nominees who have told Senators in confirmation hearings that they haven’t made up their minds how they would rule on abortion, even though they already had.

If he wanted to signal newfound integrity, he could have avoided at his confirmation hearing supporting Trump’s claims about a stolen election in 2020, as Paul Krugman has pointed out.  Warsh, like Trump himself, has attacked the Fed for easing money when Democrats were in the White House, even when unemployment went as high as 10 % [2009; inflation was low]; but then turned around and attacked the Fed for tightening money when Republicans were in the White House, even when the unemployment rate went as low as 3 ½ % [2019].

Fourth, Trump has out-done the most profligate of his predecessors by cutting taxes while increasing government spending rapidly.  Linda Bilmes estimates that the war on Iran is costing $2 billion a day and is likely to exceed $ 1 trillion altogether. All this is inflationary (all the more so if the Fed monetizes the debt).

Politicians of neither party are going to restore fiscal sustainability anytime soon.  But Democrats should evoke the 1990s, when judicious fiscal policy eliminated a record deficit, and should eventually try a similar approach.   And, again, they should terminate the costly and misguided war on Iran as quickly as possible.

Fifth, growth in the labor force has come to a halt, leading to worker shortages in certain sectors, such as construction trades, where  immigrant workers make up about one third of the labor force (32.5%),  Thus, Trump’s war on immigrant has put upward pressure on the price of housing.  Restoring sanity to our immigration policy would help to alleviate inflationary pressure a bit, similarly, in such basic goods and services as meat, fruits and vegetables, and health care.

If they run on a det affordability platform, Democrats could be attractive to voters who prioritize reducing inflation — i.e., disinflating — but are no longer willing simply to take a candidate’s word for it when they make promises without details. Such a platform should entail lower tariffs, no war in Iran, renewable energy, an independent and credible Fed, fiscal sanity, and an end to Trump’s approach to immigration.  What we really can’t afford is more years of his policies.

 

---

This post written by Jeffrey Frankel.