{"text":[[{"start":6.2,"text":"The writer is an FT contributing editor and director of economic policy studies at the American Enterprise Institute"}],[{"start":13.600000000000001,"text":"With prices rising faster than wages, workers are losing ground in the US. The consumer price index for April, released this week, shows an increase of 3.8 per cent over the year. The average wage grew by 3.6 per cent over the same period. "}],[{"start":29.6,"text":"Americans are worried — including those the GOP needs to attract to the polls in November’s midterm elections. According to a new CNN poll, 55 per cent of Republicans and 81 per cent of independents say President Donald Trump’s policies have increased their cost of living. "}],[{"start":47.05,"text":"To be sure, Trump is not blameless. But much of the culpability for inflation and high prices rests with the Federal Reserve and the previous government. "}],[{"start":55.949999999999996,"text":"Simply put, it is the Fed’s responsibility to keep inflation low and stable, not Trump’s. Those who champion central bank independence — including me — should be the first to acknowledge that accountability accompanies autonomy. "}],[{"start":70.44999999999999,"text":"The Fed has misread the economy since Trump’s second term began. It has been too confident that underlying inflation would drift back to target in the absence of Trump’s tariffs and it has put too much weight on the risk of a meaningful increase in unemployment. The central bank’s mistaken diagnoses have kept underlying inflation stuck between 0.5 and 1 percentage points above target over the past two years. "}],[{"start":95.14999999999999,"text":"But while above-target price growth plays a part in voters’ affordability concerns, it isn’t the main culprit. When people walk into grocery stores or look at restaurant menus, they experience jarring sticker shock. The overall level of prices is 25 per cent higher than it was just five years ago. "}],[{"start":113.1,"text":"Part of that increase was caused by pandemic-era supply disruptions. But my calculations suggest that President Joe Biden’s massive $1.9tn stimulus in 2021 contributed around 3 percentage points to that year’s inflation. The Fed should have responded aggressively. Instead, it kept interest rates near zero per cent for a full year after the Biden stimulus became law, only raising rates after 12 consecutive months of above-target inflation, by which time CPI inflation was above 8 per cent. "}],[{"start":147.5,"text":"It is true that, given the size of the stimulus, it would have been hard for the Fed to keep underlying inflation close to target. And to its credit, after realising the mistake, it began aggressively raising rates in the spring and summer of 2022. But by then, the level of prices had risen considerably and the inflation genie had been let out of the bottle. "}],[{"start":169.5,"text":"In the 2024 election, Democrats paid a major price for the mistakes of 2021. And it looks like high prices stemming from 2021 could hurt the GOP this November as well. "}],[{"start":181.55,"text":"Of course, Trump is not wholly innocent. His tariffs have increased the cost of imported goods for households and businesses, pushing up measured CPI inflation while offering Americans little in return. The war in Iran led petrol prices to increase by 21.2 per cent in March, and Trump has not made a serious effort to persuade Americans of the war’s merits. "}],[{"start":205.15,"text":"And his public messaging has been abysmal. Earlier this month, he said in a speech that the affordability issue was a “line of bullshit”. Last May, when asked about the effect of tariffs on consumer prices, he patronisingly argued that kids could “have two dolls instead of 30 dolls”. "}],[{"start":223.15,"text":"What can he do now to turn things around? "}],[{"start":226.25,"text":"Further interest rate reductions in 2026 could cause inflation to accelerate, and Trump should not pressure new Fed chair Kevin Warsh to cut. Jay Powell was remarkably successful at defending Fed independence from Trump’s egregious attacks. Warsh should not be put to the same test."}],[{"start":243.95,"text":"When it comes to prices, Trump should do no harm. He should eliminate the tariffs on allied nations and watch the labour market with an eye towards increasing immigrant inflows if wage pressure starts to build. He should drop the suggested fuel tax holidays and “tariff dividends” for households — these unsound gimmicks would boost demand and add to price pressure."}],[{"start":265.2,"text":"In addition, he needs to direct his search for affordability solutions away from statist impulses, such as demands to cap credit card interest rates, that would exacerbate the problem."}],[{"start":276.05,"text":"Crucially, Trump should also turn his attention away from distractions like building a White House ballroom and renovating the Lincoln Memorial’s reflecting pool and towards some of the issues that Americans have been frustrated about for decades, such as the high cost of childcare, housing, healthcare and education. "}],[{"start":292.90000000000003,"text":"Making progress here would require master statecraft — proposing solutions, driving a consistent message, persuading voters of their merit and building a consensus in Congress. This would mark a significant change for the president. But a major change is required if he is to convince Americans that he understands their concerns and is moving to address them. If he does not and affordability concerns continue to mount, there will be no way for Trump and his party to escape accountability. "}],[{"start":330.70000000000005,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779078517_7722.mp3"}