Trump voters don’t just expect higher inflation—they get it too

Price pressures don’t hit states equally, and expectations of higher inflation can fuel it. PHOTO: MATTHEW HATCHER/BLOOMBERG NEWS
Price pressures don’t hit states equally, and expectations of higher inflation can fuel it. PHOTO: MATTHEW HATCHER/BLOOMBERG NEWS

Summary

There’s always been a difference between how Republicans and Democrats view the economy. But the gap has gotten bigger.

Republicans right now think inflation is a much bigger problem than Democrats do, and a lot of that is just politics. But here’s another possibility: Many of the places Republicans live indeed have had significantly higher inflation than Democratic enclaves.

In new research, economists Carola Binder, Rupal Kamdar and Jane Ryngaert examined Labor Department inflation figures for U.S. metropolitan areas, and compared them with voting data. Their finding: Metro areas with more Republicans and independent voters tended to have higher inflation in 2022 than places where Democrats live.

A Wall Street Journal analysis found a similar pattern at the state level. Inflation estimates provided by Moody’s Analytics, combined with voting data, show that states where Donald Trump garnered the most votes in 2020 have on balance experienced higher inflation.

For example, South Carolina experienced the most inflation of any state since the pandemic hit. Its consumer prices rose at a 4.88% annual rate between December 2019 and last month. South Carolina elected Trump with 56% of the votes cast between him and President Biden in 2020.

In contrast, New Hampshire had the least inflation of any state, with prices rising at a 3.75% rate. It elected Biden with 54% of the Trump/Biden vote.

Just as importantly, Binder and her co-authors found that people in Republican-leaning states were more likely to expect that higher inflation. While feelings might seem superfluous, economists and policymakers widely believe that expectations do matter. If people think more inflation is coming, that can lead to higher inflation in fact.

Binder is an economist at Haverford College; Kamdar at Indiana University, Bloomington; and Ryngaert at the University of Notre Dame.

A widening rift

There has always been a difference between how Republicans view the economy and how Democrats do. People give the economy lower marks when their party doesn’t hold the White House. But, starting with the election of Donald Trump in 2016, the perception gap has become much wider, according to a monthly consumer survey conducted by the University of Michigan.

Consider this: Republicans polled by the Michigan survey this month gave the current economy much lower marks than they did in April 2020. Back then, the pandemic had shut down much of the country, the unemployment rate soared to almost 15%—but Trump was in office.

Similarly, the gap between Republicans’ and Democrats’ expectations on inflation has also widened. That rift broadened more recently, starting when inflation began picking up following the onset of the Covid-19 pandemic.

Economists and policymakers have been debating for months over the puzzling disconnect between a strong U.S. economy and the fact that many Americans aren’t feeling it.

A Wall Street Journal poll in March found that 74% of Americans who lived in seven swing states for the coming election said that inflation had moved in the wrong direction over the past year. In fact, inflation dropped from 6% in February 2023 to 3.2% in February 2024.

Different places, different prices

Inflation by nature isn’t uniform. Different families experience different inflation rates depending on their spending patterns and where they live.

A jump in snowblower prices would matter for families in Michigan’s Upper Peninsula, and not at all for families in Florida’s panhandle. California’s minimum-wage increase for fast-food employees might affect burger prices in the state, but it won’t move the needle in Maryland.

Moody’s Analytics chief economist Mark Zandi reckons that part of what drove inflation higher in Republican-leaning states was housing—especially with so many people moving South after the pandemic started.

“You saw significant out-migration from the Northeast and the West Coast to the South and the Mountain West that tend to be more Republican," he said. Rents, in particular, shot higher, and rents and rent-derived measures count for about a third of the spending basket the Labor Department uses to calculate inflation.

People in Republican-leaning states also tend to devote more of their spending to gasoline, so the steep run-up in gasoline prices into 2022 probably affected them more. Also, gasoline can play an outsize role in people’s view of inflation—it is a frequent purchase, and the price is right there on the pump.

Expect high inflation, get high inflation

But Binder and her co-authors posit that expectations helped push inflation higher.

The theory that beliefs about inflation matter was cemented following America’s painful experience in the 1970s. The more inflation businesses expect, the more they will raise prices in an effort to get ahead of rising costs. Similarly, workers will demand bigger wage increases if they expect more inflation, pushing labor costs higher.

Fed officials spend a lot of time talking about the importance of keeping inflation expectations anchored to keep prices from spiraling higher. And for Democrats, expectations were in fact anchored, maybe because they bought into the Fed’s belief that the recent burst in inflation would prove transitory.

“But people who didn’t believe that narrative, they saw inflation rising and they extrapolated that forward and their expectations rose," said Binder, author of the new book “Shock Values: Prices and Inflation in American Democracy." “And that in turn kept inflation rising more than it otherwise would have."

In October 2022, when inflation was running hot, Republicans in the Michigan survey said they expected prices to increase by 7.6% over the next year, versus 3.1% for Democrats. Even though inflation has since moderated, the gap remains wide: This month’s survey showed Republicans expect 4% inflation, compared with 2.2% for Democrats.

Write to Justin Lahart at Justin.Lahart@wsj.com

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