Good Cash Podcast — How Presidential Insurance policies Have an effect on Costs: Tariffs, Worth Management, Immigration and Extra

Welcome to NerdWallet’s Good Cash podcast, the place we reply your real-world cash questions. On this episode:

Learn the way presidential insurance policies on tariffs, immigration, and costs can affect your on a regular basis bills like groceries and gasoline.

What can a president truly do to decrease costs and combat inflation? Can marketing campaign guarantees actually affect your pockets, or are they simply political scorching air? Hosts Sean Pyles and Anna Helhoski talk about presidential insurance policies and the way they have an effect on all the pieces from the price of gasoline to your grocery invoice that can assist you perceive the true affect of political choices in your funds. They start with a dialogue of inflation, with ideas and methods on understanding how inflation is measured, what drives worth hikes, and what position the president performs in influencing it.

Then, Anna talks to Derek Stimel, an affiliate professor of educating economics at UC Davis, concerning the financial implications of tariffs and immigration insurance policies. They talk about how tariffs increase the worth of imported items, how immigration impacts labor prices and wages, and what these political insurance policies imply to your on a regular basis purchases.

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What’s the very first thing you do whenever you go to the grocery retailer? Do you run to the produce aisle and search for the freshest broccoli, possibly? Or conversely, are you heading for the sweet part? I do not decide. However fairly quickly after that, you are most likely beginning to have a look at costs, proper? The worth of, properly, all the pieces is a every day query in our lives. So it is not stunning that costs are enjoying an element on this 12 months’s presidential election.

I simply discover it fascinating that each presidential candidates have centered on these extremely risky markets, which we regularly assume they actually cannot do this a lot about, and which are typically pushed by these world forces principally. However each of them have centered on these as their avenues to bringing inflation down.

Welcome to NerdWallet’s Good Cash Podcast. I am Sean Pyles.

And that is episode two of our Nerdy deep dive into presidential coverage and private funds. Hey Anna, I do not know if you happen to’ve observed, however we have got a presidential marketing campaign underway.

Onerous to overlook it. Discuss drama. And each nice drama has a storyline. One huge a part of this 12 months’s storyline within the marketing campaign has been costs, particularly inflation and what it is performed to our backside strains.

Yeah. Inflation hit a excessive of 9.1% again in 2022, and we have been paying an entire lot extra for lots of issues over the previous couple of years. And it is not delicate, it is very noticeable. Anna, is there something particular that has popped up in your radar as dearer than simply a few years in the past? One thing the place you mentioned whoa, that’s far more than I used to pay.

Yeah. So I’ve a bread place close to me and some years in the past the costs have been fairly cheap for a giant loaf of contemporary bread, like $6 a loaf.

Yeah, that is like New York cheap, I am going to say.

Yeah, precisely. No, that is how I gauge all the pieces. However then flour costs spiked and instantly the worth went as much as practically $10, which is far more than I am keen to pay. What about you, Sean? Did gecko meals get dearer together with the rest?

Because you talked about it, crickets for my gecko Ozzy did go up about 12%. I now spend a whopping $2.25 every week for these creepy bugs for the outdated man. In fact, it is not simply these one-off objects, these are simply the issues that the 2 of us observed in spades. Homes are dearer, automobiles are dearer, bank cards are dearer. It simply takes extra out of your funds to purchase stuff.

So what can a president do about it? As we heard in final week’s episode, the reply just isn’t lots by themselves. They typically want Congress or the Fed or each, and generally lots of luck to have an effect on the economic system and particularly on costs. However that does not cease them from making every kind of guarantees concerning the modifications they’d make if we despatched them to or again to the White Home. Let’s speak about what they’ll do in actuality.

And as we famous within the final episode, we’re not right here to take sides or stir up an already contentious political season. Our purpose right here is identical one we at all times have at NerdWallet, that can assist you, our listeners, make sensible knowledgeable choices concerning the stuff that impacts your funds. Generally which means selecting a brand new high-yield financial savings account. Different instances which means voting for the candidate who you consider will aid you obtain your life and monetary targets.

All proper, properly, we need to hear what you assume too, listeners. To share your ideas across the election and your private funds, depart us a voicemail or textual content the Nerd hotline at 901-730-6373. That is 901-730-N-E-R-D. Or e-mail a voice memo to [email protected]. So Anna, who’re we listening to from immediately?

We’re speaking with Derek Stimel. He is an affiliate professor of educating economics on the College of California, Davis. So not solely is he an skilled in macroeconomics, however he is an skilled in educating it. He’ll assist us parse what presidents can and may’t do to have an effect on the worth of all types of products that all of us purchase. Derek Stimel, welcome to the present.

Presidential administrations are likely to take the credit score or get the blame for issues that occur, not less than on the subject of public notion. That implies that the Biden-Harris administration has taken lots of flak from the Republican Get together and from many People for elevated costs that we’re seeing within the wake of the pandemic. And since we’re only a few months away from a brand new administration, are you able to discuss slightly bit about how a lot affect presidents even have on inflation and costs?

Usually we do not consider them as the main driver of inflation within the economic system. Often, it is issues like financial coverage, so rates of interest, and the availability of cash. Generally it may also be issues exterior of the economic system, shocks as we generally say in economics. So issues that occur globally, for instance. Having mentioned that, it is to not say that there cannot be some causes which are pushed by coverage of the federal government. For instance, within the present scenario, some folks do level to some authorities spending that happened within the aftermath of COVID and the insurance policies surrounding that. Which may’ve been some gas for inflation. Nevertheless it’s not often the very first thing we consider. On this specific scenario of our current inflation, I think it is not the primary primary factor inflicting the inflation.

Let’s get into a number of the marketing campaign guarantees that every candidate has made. A few of the guarantees would possibly simply be politicking, however a few of it might turn out to be a actuality. Begin off with former President Donald Trump’s proposals. To date, there have been a number of reviews and assessments from economists who say that his proposals, if enacted, can be inflationary. And one of many fundamental drivers of that projected inflation is Trump’s promise to levy 10% across-the-board tariffs on all international items. Are you able to clarify how tariffs and costs work together?

Tariffs are principally a tax on imported items. For any tax, it may have the next results available on the market, which is, the tax will get levied, let’s simply say it is the ten% simply to have a quantity. After which the companies principally need to, in a way, decide about can we take up this tax ourselves, can we cross it on to the shoppers, and if that’s the case, in what quantity? They could not cross on the complete 10%, it is unlikely they’ll take up the complete 10% themselves. So there’s going to be a break up. So in some free setting, possibly they increase costs by 5% and so they take up 5% of it to stand up to the ten, or possibly it is 8 and a pair of, or 3 and seven, or what could also be. However the level is that principally, it may result in increased costs on these merchandise.

So on this specific scenario, we’re speaking about increased costs for imported items. And I feel as we’re all typically conscious from our day-to-day purchasing and if we ever have a look at the label of something, we purchase lots of imported items in america. So it is not unreasonable to assume that elevating taxes primarily on imported items would finally enhance the costs of these imported items after which on common increase our price of dwelling not less than considerably.

Now, Trump claims that his tariffs would spur American manufacturing and home competitors for manufacturing. Is that one thing that does occur or would doubtless occur because of tariffs?

So it positively can occur that there may very well be some… you realize, companies need to make the perfect choices primarily based on the foundations of the sport as they’re. Elevating tariffs would positively change the foundations and companies would doubtless reply to that. And so to the extent that they might and that the U.S. was a serious market to them, not less than some companies would attempt to reallocate or relocate again into the U.S. with the intention to keep away from this tariff, principally. However I feel the query is: Would that be sufficient to counterbalance the impact of this increased tax throughout the board? I haven’t got onerous knowledge on it, however the doubtless reply is it would not be sufficient. So we’d nonetheless see increased costs because of this, and so we must cope with the results. However there may very well be some reallocation or relocation of companies for positive.

One other promise Trump has made is to decrease gasoline costs. Below his first administration, he elevated oil manufacturing after which Biden went additional nonetheless. So how a lot can a president affect gasoline costs?

The gasoline market or the marketplace for power extra broadly outlined may be very a lot a world market, however the U.S. is in a means in a novel place of being the middle of that world market. You hear lots about that the U.S. greenback is that this world reserve foreign money. Oil for instance is often traded in {dollars} and that type of factor. So we do have slightly bit extra energy than another nations. The reply can be possibly a bit completely different if it was us speaking about Canada doing one thing or no matter. Additionally it is most likely true that gasoline costs or costs of power generally are actually typically pushed by these world shocks. So on this specific case, the disruptions that happened as a result of Russia’s invasion of Ukraine are actually the prime mover most likely of power costs within the current years. And it is not clear that any president would be capable to have performed one thing about that instantly. Clearly, it is extra of a geopolitical factor than an financial coverage factor.

Switching gears once more, I am hoping you’ll be able to discuss slightly concerning the connection between immigration and the costs that customers pay for sure on a regular basis items and companies. And be aware for listeners, as you might know, Trump has promised to make use of regulation enforcement and the Nationwide Guard to deport many tens of millions of undocumented immigrants. Past the humanitarian implications and the logistical questions raised by this proposal, what are a number of the financial implications?

Form of a traditional mind-set about it economically, particularly once we’re speaking about issues like inflation, is that we predict that enterprise prices principally would drive lots of inflation, or not less than it may very well be a first-rate driver of inflation. And inside these enterprise prices, labor prices are sometimes a big portion of these prices. And naturally, that has to do lots with the availability of labor that is obtainable relative to the demand for that labor. And so we dwell in an growing older society, the child boomers are principally retiring. And naturally, that is lowering our labor provide or not less than more likely to scale back our labor provide within the coming years. So what that will imply economically is that will are likely to push up wages all else the identical, which in fact then might additionally push up costs. Companies, after they face these elevated labor prices, have to select about how a lot to cross on to prospects by way of increased costs.

So with that each one in thoughts, if you happen to additionally reduce off the quantity of immigration into the economic system, you’d assume that that is more likely to put additional stress on wages within the economic system. It may additional, in a way, scale back or not less than not present any additional slack for the availability of labor, and in order that’s going to additional push up wages and additional push up costs general. That is to not say we should not take into consideration reforming immigration in a roundabout way, form, or type, however that is simply to say economically that if you happen to scale back the availability of labor, the worth of that labor, the wages, and all the opposite types of compensation that include it’ll go up and companies are going to cross not less than a few of that on to prospects within the type of increased costs.

And are there any particular areas of the economic system that may very well be altered if you happen to deport tens of millions of people that have been already within the workforce?

There’s the preliminary disruption, uncertainty that will encompass it, which might shake out in all types of how, a lot of that are most likely not optimistic. Think about the native restaurant down the road instantly loses half its workers. And what are they going to do? So we’d anticipate lots of service sector jobs to possibly be impacted by these types of issues, lots of issues that we work together with every day. After which there’s additionally this challenge about if you happen to create shortages in a single space, as an instance you create a scarcity in a single service sector, it might spill over to different unrelated service sectors as properly. Perhaps now the one sector has to principally go poach staff from the opposite one. And so possibly it begins to spill over into different areas the place you would not consider, say, quote, unquote, “unlawful immigrants” principally enjoying a job, but it surely truly might have this cascade to different markets.

Extra of our interview in a second. Stick with us. I need to speak about Donald Trump’s proposal to weaken the ability of the Federal Reserve by bringing the central financial institution beneath extra direct management of the president. And listeners, we have mentioned it earlier than, however the Federal Reserve is nonpartisan and operates independently. That implies that the president would not inform the Fed what to do and the Fed would not make its choices primarily based on politics. Derek, it looks like the separation is fairly essential to making sure public belief within the central financial institution’s potential to make choices. But when Trump was profitable in his plans to extra instantly affect the Fed’s actions, what are a few of these financial implications?

Stepping again for a second, we typically assume that the Fed’s fundamental position is to maintain inflation, particularly over the long term, comparatively low and secure. And one ingredient that tends to be essential to that’s their principally credibility to decide to that coverage of protecting inflation low and doing what it takes. None of us preferred within the current years the rates of interest going up, but it surely’s seen as this essential factor to do to carry inflation again all the way down to that longer-term purpose. And so the priority principally is that lots of that comes from the truth that the Fed is impartial to a point from the remainder of the federal government. It is vital to grasp that they are not utterly impartial. The president performs a job in nominating folks to serve within the Fed. Congress clearly has to approve these items. However this normal separation of like, oh, you’ll be able to’t inform us when to vary rates of interest or you’ll be able to’t inform us we will not do that coverage and now we have to do another coverage or no matter, that tends to be vital as this inflation fighter credibility that the Fed has.

If that will get eroded, I feel the priority can be principally that folks within the economic system begin to not consider within the Fed as a lot as an inflation fighter. That lack of credibility begins to make folks assume, “Nicely, they are saying they need 2% inflation, however given that they are tied to the remainder of the federal government, I feel it is possibly going to be extra like two and a half, 3%.” So expectations begin to tick up on inflation. And one factor about inflation is that expectations actually play an vital position and so they are usually self-fulfilling. All of us anticipate 5, we’ll get 5. And so principally the Fed’s independence is one in every of… There’s some others in fact, but it surely’s one of many fundamental issues that is tying down these expectations as a result of it is serving to the Fed keep its credibility to be there once we want them to combat inflation.

Nicely, these are the principle issues I need to speak about by way of Donald Trump, however I need to change gears and speak about Vice President Kamala Harris’s plans to battle inflation. She not too long ago unveiled a plan to ban worth gouging. So first off, what’s worth gouging and the way have we seen it occur?

So in economics, worth gouging would not actually have a particular definition, to be trustworthy with you, however the free thought is that it is taking, quote, unquote, for lack of a greater time period, “unfair benefit of a scenario with the intention to increase costs.” Generally these conditions are apparent, that are… There’s an earthquake that occurs, as an instance, so instantly the worth of gasoline and water within the surrounding space goes to skyrocket. That sort of thought of benefiting from different folks’s distress and one thing that was actually out of their management, a pure catastrophe, that is actually what we see as worth gouging. So on this specific context, what we’re speaking about with Vice President Harris is that this view the place, say, for instance, grocery shops benefiting from the circumstances to principally increase costs on their merchandise in an unfair means. However it is a bit nebulous when you begin to get away from issues that I feel all of us would agree are clearly issues out of our management, like pure disasters.

And is there something already in place to stop worth gouging?

So states typically have legal guidelines that stop worth gouging within the conditions we’re speaking about like pure disasters, so hurricanes and floods and earthquakes, and so forth. What Vice President Harris is absolutely speaking about is principally a federal ban throughout the board on all types of worth gouging. A minimum of that is what I perceive it to be. And we do not have that. It is probably not clear what the factors can be for that as properly. So for instance, if an organization raises costs on its merchandise by 5%, how can we resolve if that is simply regular market forces or is it worth gouging in some methods? In different phrases, how can we resolve the equity of all of it? Usually talking, in our economic system, we let the markets work that out, after which everyone individually decides about, nope, that is too costly, I am not going to purchase it, or I assume I am keen to pay that worth, that sort of factor.

So some critics of Harris’s proposal, together with Donald Trump have mentioned that this can be a worth management. So what’s a worth management? Why do not economists like worth controls and would Harris’s proposal to ban worth gouging truly be a worth management?

Principally, a worth management is actually the federal government setting a most worth in a market. So type of saying, “Hey, you’ll be able to cost not more than X for this product.” And naturally, now we have worth controls within the economic system. Those that folks usually speak about classically are sure cities which have lease management. What persons are principally saying is that this worth gouging thought would in a means restrict how a lot companies can increase costs. And that will in a means be much like what occurs in a worth management scenario the place the federal government typically does cap how a lot a enterprise can increase costs.

The great and unhealthy of economics lots of instances is that there is tradeoffs for all the pieces. Concern can be principally that possibly grocery shops, as a result of that is the one which’s been central to all this argument, has actually been the worth of meals, is that principally, possibly you would not see as many new grocery shops opening up, or not less than in a decrease frequency. Perhaps you’d begin to see the standard of what is on the cabinets within the grocery shops begin to decline slightly bit. So on the one hand, you get the costs of the stuff you purchase do not go up as a lot possibly, however alternatively, there’s much less of them obtainable and not less than for a few of them, possibly the standard of these merchandise would possibly go down slightly bit.

So past stopping worth gouging, Harris has additionally vowed to decrease prescription drug costs and she or he desires to do that with worth caps by permitting Medicare to barter costs, rushing up supply of generic medication, and cracking down on huge pharma. So how impactful might a few of these efforts be by way of making prescription drug costs extra reasonably priced?

Oh, it might. Not surprisingly, the federal authorities through Medicare is a big shopper on this market, which principally means they’ve lots of energy, market energy we’d name. On this specific case, the technical time period is monopsony energy. However principally, yeah, they might have lots of energy doubtlessly to barter and there can be spillover results for individuals who haven’t got Medicare. When it comes to with the ability to decrease, say, prescription drug costs by permitting Medicare to do that large negotiation principally with the large pharma firms, that truthfully might have a huge impact on these costs for positive, as a result of Medicare is so enormous.

Proper. And also you touched on housing earlier, however let’s discuss slightly bit about Harris’s huge proposals along with her plans to make housing extra reasonably priced. One that basically caught out to me is a plan to stop company landlords from utilizing price-fixing algorithms.

It is a courageous new world that we’re in, and there is lots of instances the place regulation is behind the know-how, the place principally lots of these companies… And it is in fact not simply in actual property, it is in lots of different areas as properly, in finance specifically, the place they principally use these computerized algorithms to primarily seek for the offers that they need to transact. Is it price-fixing or is it the truth that all of those algorithms principally are likely to level in the identical course as a result of they typically use the identical knowledge with the intention to churn by means of all their calculations? It isn’t clear to me, I assume, how that could be enacted after which additionally what the implications can be.

And Harris mentioned she would assist building of three million new housing items within the subsequent 4 years, amongst different plans. And basically, with the intention to decrease housing costs or lease or the availability of properties for buy, we simply want extra housing. So might Harris’s proposals spur extra building? And in addition what can a president do to facilitate housing progress?

A lot of that is native. I imply, a lot of that is purple tape primarily based on native housing boards and all these different kinds of issues, the “not in my yard” sort of stuff. And so it is probably not clear what anyone at a nationwide stage might actually do about that sort of stuff as a result of a lot of it’s the entire native political machines and so forth that principally drive all these insurance policies. As a normal thought, I feel the fundamental level that, sure, the way in which you need to principally decrease housing costs or not less than preserve them from going up as a lot is to produce extra housing, is certainly the reply. As a result of the housing market in a way is exclusive in comparison with different markets, in that the availability is principally mounted by the variety of items and really, what we’d say in economics, inelastic. You are not going to actually get round that until you simply merely construct extra.

Derek, are there some other proposals from both of the candidates that we’re overlooking that would contribute to decreasing costs or to growing inflation?

I feel the very last thing I’d point out, I assume. I do know President Trump desires to extend the home manufacturing of pure gasoline and coal and all that type of factor. And I do discover it fascinating that each Vice President Harris and President Trump have centered on these areas of inflation. Within the case of former President Trump, it is power prices, and within the case of Vice President Harris, it is principally meals prices. And these are the issues which are particularly excluded by the Fed after they’re trying on the longer-term measures of inflation. So I simply discover it fascinating that each presidential candidates have centered on these extremely risky markets, which we regularly assume they actually cannot do this a lot about, and which are typically pushed by these world forces, principally. However each of them have centered on these as their avenues to bringing inflation down.

I feel the very very last thing I would add in, which might be too huge to actually get into, is the extent that the deficit and the nationwide debt would possibly play by way of inflation in different elements of the economic system, particularly going ahead because it’s ballooned lots. There are some theories on the market, for instance, that it does play a job in inflation and to the extent that the insurance policies of the 2 candidates would possibly add to the deficit, and naturally, then by extension add to the debt. That may very well be in a means a hidden inflation issue that we are likely to not focus a lot on.

And one we’ll most likely pay for sooner or later.

Yeah, any individual will ultimately.

Derek Stimel, thanks a lot for becoming a member of us immediately.

Yeah, completely. Thanks a lot for having me.

Sean, there’s one thing else I need to level out that I did not get to in my dialog with Derek, however got here from researching an article on this matter, and that is worth tolerance. Proper now, persons are nonetheless fairly worth illiberal as a result of a lot is elevated from the place we bear in mind it being. But when costs truly did drop throughout the board, it might be a giant downside. Financial system-wide worth drops actually solely occur when there is a huge recession. And I feel Trump and Harris’s campaigns each know this. They can not carry again pre-pandemic costs, so what they’ll do strategically is make guarantees which are most related to folks.

Proper. And final week we talked about how one particular person president cannot actually remodel the economic system on their very own. However your dialog with Derek Stimel illustrates how a president’s priorities could make an even bigger affect on an issue-by-issue foundation. Former President Trump is concentrated on decreasing the worth of gasoline. Vice President Harris desires to make housing extra reasonably priced. And we noticed how President Biden was in a position to push for decrease costs on sure medication like insulin. Though we must always be aware, in fact, that Biden wasn’t ready to try this with out the assistance of Congress.

So Sean, one different factor. Perhaps it is apparent but it surely’s value saying, is that whereas now we have pointed to lots of methods wherein a president can’t actually management issues like pricing, the president can be the chief of his or her respective political get together, and that usually implies that the get together and its political leaders will coalesce round these insurance policies, making them extra viable.

Yep. We have talked about that the president typically has to work with Congress to get payments handed that may fulfill their guarantees. And members of their get together, whereas they do not essentially march in lockstep, they are going to often work with that president to pursue his or her financial agenda. So no, the president cannot wave a magic wand, but when their get together additionally has management in Congress, that makes a world of distinction within the potential to make these targets occur.

And that is a case for ensuring you are taking note of what candidates are saying up and down the poll. The presidential candidates aren’t the one ones to make a distinction. Perform some research in your congressional candidates, and for that matter, metropolis council and college district, as a result of all of them contact public cash and that is your cash. It at all times helps to teach your self on how they plan to spend it. You’ll find the newest cash information updates in NerdWallet’s monetary information hub, which we’ll hyperlink to within the present notes, or simply search on-line for NerdWallet monetary information.

So Anna, inform us what’s developing in episode three of the sequence.

Nicely, Sean, subsequent time we’re utilizing a phrase no one likes however issues lots to your funds: taxes. We’ll hear what the present candidates for the very best workplace within the land need to do with the cash that comes out of your paycheck.

Two-thirds of the price of making these particular person tax cuts everlasting would go to the richest fifth of People. So to the richest 20% of People. So only for a way of what that may price, in 2026 alone, that may price greater than $280 billion.

For now, that is all now we have for this episode. Do you may have a cash query of your personal? Flip to the Nerds and name or textual content us your questions at 901-730-6373. That is 901-730-N-E-R-D. You can even e-mail us at [email protected]. And bear in mind, you’ll be able to comply with the present in your favourite podcast app, together with Spotify, Apple Podcasts, and iHeartRadio to mechanically obtain new episodes.

This episode was produced by Tess Vigeland and Anna. I helped with enhancing. Rick VanderKnyff and Amanda Derengowski helped with fact-checking. Megan Maurer combined our audio. And a giant thanks to NerdWallet’s editors for all their assist.

And this is our temporary disclaimer. We aren’t monetary or funding advisors. This nerdy data is supplied for normal instructional and leisure functions and will not apply to your particular circumstances.