People watch the ABC News presidential debate between Democratic candidate, U.S. Vice President Kamala Harris, and Republican candidate, former U.S. President Donald Trump, on Tuesday, September 10, 2024, during a viewing party at The Abbey, a historic gay bar in West Hollywood, California. The economy remains central to both campaigns, even as inflation cools and wages rise. (Mario Tama/Getty Images)
Inflation hit a three-year low last month, just as the presidential election approaches.
But the high cost of housing and other basic necessities keeps the economy at the center of both major campaigns, as evidenced this week by the first debate between Kamala Harris and Donald Trump.
The consumer price index, a measure of inflation, rose 2.5% over the past year, the smallest jump since February 2021, according to the latest data from the Bureau of Labor Statistics released Wednesday. The main driver of the increase was housing, which rose 0.5% in August. Airfare, auto insurance, education and clothing also rose that month. But wages also rose 0.4% in August and 3.8% over the past year, and the average workweek increased by 0.1 hours — welcome news for workers trying to keep up with the cost of living.
Voters continue to say that the economy plays a major role in deciding who should be president, at 81%. Furthermore, four in 10 say that the economy and inflation are the most important issues that will influence that decision.
Trump, the former president and Republican candidate, blamed the Biden administration for high prices during Tuesday morning’s debate in Philadelphia, falsely claiming that post-pandemic inflation is the worst ever.
“We’ve had a terrible economy because of inflation, which is truly a country destroyer, it’s breaking countries apart, we have inflation like very few people have ever seen before, probably the worst in the history of our country,” Trump said.
The highest inflation rate in U.S. history was in 1980, at 14%. The current surge—the highest inflation spike since then—peaked at 9.1% in June 2022.
Democratic candidate and Vice President Harris responded to Tuesday’s question about the economy by touting tax cuts to lower the cost of housing.
“Housing costs are far too expensive for far too many people. We know that young families need support to raise their children and I plan to extend a $6,000 tax cut for those families, which is the largest child tax credit we’ve given in a long time, so that those young families can afford to buy a crib, buy a car seat and buy clothes for their children,” she said.
Harris also introduced a proposal for a $50,000 tax deduction for small start-up businesses.
Taylor St. Germain, an economist at ITR Economics, an independent economic research and consulting firm in New Hampshire, said the latest data show inflation is slowing enough to suggest it’s time for the Federal Reserve to cut rates.
“It’s encouraging to see inflation coming down and coming down to these much lower levels,” St. Germain said. “But of course it’s still high and one of the reasons it’s still high is that housing costs are driving a significant portion of that inflation, with rents rising, particularly when we look at this latest CPI report.”
The Fed began raising interest rates in March 2022 to curb inflation. It has raised rates 11 times, with the last rate hike taking place in July of last year.
Economists are watching closely to see if the Fed will cut interest rates at its meeting next week, which is expected to have an impact on the housing market and other costs.
Kitty Richards, senior strategic advisor at Groundwork Collaborative, a progressive think tank based in Washington, D.C., said the Fed’s decisions are contributing to housing prices.
“The housing problem is fundamentally a supply problem. And the Fed’s actions are actually making that supply problem worse by locking up the housing market and making it more expensive to buy homes, build homes, or renovate homes,” she said. “Housing is such a big part of people’s experience with the economy and it’s really important for people when they want to move and look around and they can’t. They can’t even afford to buy a home that’s the same price as the home they’re living in because interest rates are so high.”
