US inflation has come down sharply. But it could still be Harris’s downfall

“We are not going back,” declared Kamala Harris at a recent campaign rally in Atlanta, Georgia, as the US vice-president warned about the “brutally serious” consequences of Donald Trump returning to the White House.

“Not going back to what — when things were better?” asks Kristen Reese, recently laid off from her hospice administrator job and irate about the surging cost of living. “Then where are we going? Further into hell?”

Reese, 43, is “thankful” for President Joe Biden’s work cancelling student debt, but plans to vote for Trump, betting that he will do a better job tackling inflation. “Running the country is a business, and you want a businessman running it or what? I do.”

Days away from going to the polls, the stakes have never seemed higher for American voters. Trump’s re-election bid has prompted widespread warnings about the threat to democracy, not least from his one-time chief of staff who said he fitted “the general definition of a fascist”.

Trump in turn has issued dark alerts about “millions” of migrants crossing America’s southern border and proposed militarised mass deportations from the US, which he says is becoming a “garbage can for the world”.

But for many undecided voters who will ultimately determine the result, the concerns are more mundane: the cost of living and especially inflation.

“Despite the other big issues in American politics . . . voters actually care about their economic welfare more than anything else,” said Erik Gordon, a professor at the University of Michigan Ross School of Business.

Or as Bernard Yaros from Oxford Economics puts it, borrowing from political strategist James Carville’s famous coinage: “It’s inflation, stupid!”

If Trump wins a second term next week, popular discontent about the price of everything from petrol and groceries to rent and clothing will be a significant reason — and the Republican is pinning much of his campaign on it.

“I’d like to begin with a very, very simple question: are you better off now than you were four years ago?” he asked as he opened a rally in Pennsylvania on Tuesday evening.

US annual inflation hit a multi-decade high of 9.1 per cent in mid-2022 amid snarled supply chains caused by the pandemic and a surge in commodity prices after Russia’s full-scale invasion of Ukraine.

In September, it was 2.4 per cent — beaten lower by more than a year of high interest rates from the Federal Reserve. But prices are still up by roughly 25 per cent on average since 2019, according to the Bureau of Labor Statistics.

The cost of petrol — politically potent, given its visibility on every highway — has averaged $3.48 a gallon this year, over 30 per cent higher than its average in 2019, though it has fallen recently.

But the biggest burden has fallen on lower-income Americans — who also account for a relatively large portion of undecided voters. The poorest households in the US have endured an extra two percentage points of cumulative inflation relative to the richest households since 2019.

One big reason is rents, now about 30 per cent higher on average than in 2019. Lower income households are more likely to rent their home.

“Experiences of inflation leave quite a scarring mark,” said Stefanie Stantcheva, professor of political economy at Harvard. “Inflation induces a big sense of inequity and injustice.”

Although Harris has eroded much of Trump’s earlier polling advantage on whom voters trust on the economy, high prices remain a threat to the Democratic candidate next week. Some frustrated voters will simply opt to stay home.

“It’s not going to make a difference to me,” said Javier, a 32-year-old Atlanta resident, who declined to give his last name and said he would not vote for either candidate. “The Democratic and Republican party is part of the same house.”

Inflation, he said, was “putting people in a hole, it’s putting you in the grave before your time comes”.

“It’s not going to change. Both parties tell lies.”

Georgia is also the most unequal of the election’s swing states and Atlanta — by some measures — the most unequal city. Rent costs in Atlanta have increased cumulatively by 43 per cent since 2019 relative to 30 per cent in urban areas nationally. In one Atlanta postcode, rents have risen almost 70 per cent since 2019, according to Zillow, a listing website.

Vallon Laurence, 68, a Navy veteran in Atlanta, supports Harris but believes many Democratic voters will not show up to vote for the candidate from the Biden administration. “It’s easy to blame the president,” he said.

On paper, the US economy is the envy of the world and Harris — Biden’s vice-president — has much to brag about: GDP is motoring, unemployment is historically low and borrowing costs are falling.

But while employment and wages have soared under Biden — partly as a result of to the strong Covid recovery — voters tend not to credit the administration.

For most people, “inflation is always a sign of a bad economy, it’s never a byproduct of a great economy”, said Stantcheva.

Nominal wage growth has generally outstripped inflation for all income groups since 2020. But voters are more inclined to see wage increases as their own doing rather than the government’s.

“People tend to blame whoever is in charge for inflation. And they don’t seem to give credit to whoever’s in charge for wage increases,” said Xavier Jaravel, professor of economics at the London School of Economics.

Accounting for the fact that poorer households have experienced higher inflation over time, the real income gains are even worse for low-income households.

Between 2002 and 2019, Jaravel calculates that real income for the bottom quintile of the population rose by just 2.4 per cent, versus about 25 per cent for the top quintile.

Real wage growth at the lower end has been much faster since 2020, however, boosted by a tight labour market. But that has not always fed through to voter sentiment.

“It doesn’t stop or slow down,” said Cornelius Walker, 32, an author and podcaster in Atlanta, who addeds that many people he knows had reverted to having roommates to cut down on rent costs and “want to know exactly” how the two candidates are going to address the malaise.

“A lot of people are having a big, big issue with the cost of food,” says Walker. “Groceries are outrageous. Bread used to be $1.50 or something for a loaf. Now everything is like $3-$4. Also the cost of eggs — it’s just a lot.”

Driving his Uber around Atlanta, Tommy Brown, 55, hears passengers fume over the cost of living. Many blame Harris, seeing her as the new face of the Biden administration. “It looks like she’s not doing her job.”

An FT Michigan-Ross poll released last week found 45 per cent of voters trusted Trump to leave them better off financially, versus 37 per cent for Harris. More than three-quarters of voters said price increases were among their main sources of financial stress.

Trump sees this as fertile territory to hoover up votes, claiming “inflation will vanish completely” if he is re-elected.

The former president has vowed to unshackle US oil production — currently at record highs — to bring down prices at the pump, even though they have fallen steadily recently. He would also dial back government spending, cut regulations and slash taxes.

Harris’s plan to bring down prices would include capping the costs of medicines, a crackdown on “gouging” by grocers, building more houses and offering credits to homebuyers and families. She also says Trump’s plan to ratchet up tariffs would amount to a tax on consumers.

“Our biggest challenge is to lower costs,” she said in a speech on Tuesday. “I get it.”

Will her efforts be enough?

Ansley Rosenberg, 23, will vote for Harris and blames Trump for the inflation. She was forced to almost double her fees as a nanny recently to cover the increase in her rent — a “crazy upscoop”, she acknowledged, but she “couldn’t afford to do it any cheaper”. Now she runs a pop-up clothes stall in downtown Atlanta, where she is feeling the pinch from higher garment costs.

For Elijah Richardson, 27, who runs a car-hire business, backing Trump is an easy decision. “You’ve seen the difference — when Biden was in office and when Trump was in office. There’s really nothing else to say.”

Additional reporting by Lauren Fedor in Washington