Americans crave pre-Covid prices. Former President Donald Trump is promising to make them a reality.
“Prices will come down,” Trump told voters during a speech last week laying out his vision for a return to the White House. “You just watch: They’ll come down, and they’ll come down fast, not only with insurance, with everything.”
There’s no doubt the federal government can help influence the price of certain goods and services. However, broad-based price declines are not only improbable, they would bring about a doom loop difficult to escape from.
“Prices will come down and come down dramatically and come down fast,” he said.
Trump vowed to slash not just the price of gasoline, cooling bills and electricity, but predicted this would happen across the economy.
“Unquestionably, this is what people want to hear. And unquestionably, this is unrealistic,” Justin Wolfers, an economist at the University of Michigan, told CNN in a phone interview.
It’s one thing to try to slow the rate of inflation, making prices go up at a more gradual pace. That’s exactly what the Federal Reserve has been working to do the past two years, with a surprising amount of success.
But what Trump appeared to be describing is deflation: widespread price drops. And that’s something that scares economists because of what it portends.
“The way to bring about deflation would be to create a massive recession. That would cause businesses to start cutting prices,” Wolfers said.
But falling prices are problematic because they would stall the economy in its tracks.
