The big issue on voters’ minds these days is “affordability.” And suddenly that’s all anyone wants to talk about, including Donald Trump and Zoran Mandani last week in the Oval Office. But here’s an inconvenient truth: once prices rise, they rarely fall back to their old levels, instead they re-anchor — and that’s the reality the legacy media is loath to tell the voters because it doesn’t fit the democrat narrative.
During the Biden’s administration the United States experienced its worst inflation in 50 years, and neither Trump nor Mamdani can flip a switch and bring prices down overnight. However, during a campaign rally in August 2024, Candidate Trump said: “When I win, I will immediately bring prices down, starting on Day 1.” But Trump’s statement begs the question, was that awkward grammar or was Trump’s statement intentionally nebulous?
Trump’s statement has two distinct timing cues: “immediately” suggests occurring instantly, i.e., right away, while “starting on Day 1” suggests action on the first day in office with results to follow. Those two ideas don’t mean the same thing; therefore, the statement is subject to interpretation just as Hope & Change meant different things to different people.
Meanwhile, from a historical perspective there have only been two occasions in American history when prices fell meaningfully after an inflationary period. The first occurred in 1920–1921 shortly after the First World War when prices dropped 15–18% nationwide. But at the same time, wages fell, unemployment spiked, the Federal Reserve tightened money in a deliberate monetary contraction and the wartime demand collapsed.
The second occurred during the Great Depression from 1929–1933 – the CPI fell 25% as commodity, farm, retail, and wholesale prices collapsed reverting to early-1920s levels. But the nation also endured a banking collapse, a consumer crash, and mass unemployment. History reveals that prices don’t revert or rewind; they reset.
When the price of consumables jumps, higher prices become a new baseline. The COVID ‘stimulus’ of 2020–2023 may have benefited some Americans, but as Barack Obama’s former chief of staff, Rahm Emanuel, opined, “You never want a serious crisis to go to waste,” and the Biden administration did not allow COVID to go to waste politically.
COVID gave the democrats cover to bail out favored constituencies and voting blocks, while ensuring prices would rise post COVID. And today those prices are well-baked into the system. Another reality is even if inflation fell to zero tomorrow, we still would not see a return to anything near pre-COVID consumer prices because there are just too many factors at play.
For example, falling housing prices will help some people (primarily first-time buyers), but they will create serious pain for homeowners, banks, local governments, and the financial system at-large. So yes, new entrants get a window of opportunity, but existing homeowners would take a hit, e.g., equity declines, loan-to-value ratios go up, and refinancing becomes far more difficult. Lenders hate falling home prices because collateral value drops and when collateral weakens, loan losses increase, resulting in more foreclosures while mortgage-backed securities lose value that starts a cascading chain reaction.
Property taxes are the #1 revenue source for cities and counties and falling home prices mean lower tax assessments. Perhaps more importantly, when home prices fall homeowners ‘feel poorer’ and as a result spending slows and consumer confidence drops, which is why housing downturns often lead to recessions.
And here’s the real political/economic truth: the American economy is structurally addicted to rising home prices because so many systems rely on home equity being stable or growing, which is why broad-based home-price declines almost never happen without a recession or an attendant financial crisis.
It’s an economic fact of life that every price increase erects its own platform, and when systems adjust upward, they tend to stay adjusted! However, when prices do fall, they do so for two primary reasons. The first, as noted, is meaningful price declines have historically happened only during deep recessions when demand collapses; the second is, major technological breakthroughs. Think consumer electronics, over time innovation has made these items far less expensive.
But as history attests, for commodities and housing it doesn’t work that way. Even when inflation is supposedly “tamped down” the higher cost base remains baked into wages, contracts, and economic forecasting. That’s why temporary slowdowns in inflation aren’t the same as a return to prior price levels, and why Zoran Mamdani ‘promise” to bring down prices is a fool’s errand – but New York voters believed what they wanted to believe and will be disappointed.
Meanwhile and vis-à-vis the foregoing, there is one absolute economic truism; politicians making promises about the economy is fantasy; economic governing is math.