Trump Claims U.S. Inflation Is The Worst It’s Ever Been—Here’s Why He’s Wrong

 

Former U.S. President Donald Trump holds up Tic Tacs as he speaks on inflation at a Thursday event in Arizona.

Inflation is the worst it’s ever been in American history, former President Donald Trump falsely claimed this week at a campaign event, also offering up questionable solutions to the very real issue of Americans’ discontent over their weakened spending power.

KEY FACTS

“We have the greatest inflation, in my opinion, in the history of our country,” Trump said Thursday at a rally in Phoenix, adding “we’ve never had inflation this bad.”

Though inflation is historically painful, Trump’s assertion is faulty at best, according to annual inflation data measured by the consumer price index, the most widely cited inflation metric, which tracks the cost of a basket of goods and services relevant to the typical American, weighted toward the components that tend to eat up the largest portion of budgets, such as food, rent and gasoline.

Year-over-year inflation peaked this cycle at a four-decade high of 9.1% in June 2022, but that rate has been surpassed numerous times in history, including during the 1980s (peaking at over 14%), the 1970s energy crisis (year-end inflation peaked at 11.1% in 1974) and the periods surrounding the World Wars (17.8% inflation in 1917 and 10.9% in 1942).

Inflation has come down considerably from its 2022 peak, coming in at a three-year low of 3.4% in April.

Trump also claimed inflation is at “almost 50%,” which is false on a year-to-year or four-year basis: The consumer price index has jumped 50% from October 2007 to April 2024, though inflation isn’t usually measured in nearly two-decade stretches since wages, consumer spending trends and political regimes have also changed drastically over that period.

In the context of his speech, it’s most likely he was referring to price increases during the Biden Administration, which are at an alarming 19.5% from Dec. 2020 to April 2024, according to CPI, but far short of 50%.

WHAT IS TRUMP’S PLAN FOR INFLATION?

Trump’s inflation salves floated Thursday were similarly inconsistent with conventional wisdom, as he said there will be “a lot of cutting” to interest rates should he win another presidential term. The independently run Federal Reserve is already widely expected to bring down rates this year irrespective of election results. Trump also seemingly advocated for deflation, where prices decrease year-over-year, a concept which sounds better in theory than in practice as it can cause recessions as less money flows into the economy, telling the crowd, “We’re going to get rid of inflation…not just where you don’t have inflation, where going to bring those costs down.” Since 1960, the last year in which prices fell on an annual basis was 2009 during the Great Recession. Trump also told his supporters he will cut energy prices “in half,” a measure that would likely be highly unpopular among the oil and energy companies whose employees he counts among his top donors.

Bidenflation Far Less Painful Than Trump Says 

Cumulative CPI Inflation Since Dec. 2020

Total change in the consumer price index from Dec. 2020 to corresponding month of Biden's presidency, ending this April (month one is Jan. 2021).

Chart: Derek SaulSource: Federal Reserve Bank of St. LouisGet the dataCreated with Datawrapper

TANGENT

Trump falsely asserted Thursday interest rates “went from 2.5% with me up close to 10%.” The target federal funds rate did peak at 2.25% to 2.5% under Trump, but it now sits at 5.25% to 5.5% and has not been above even 8% since 1990. The Fed is mandated to set the target federal funds rate, which impacts the cost of borrowing for consumers and companies alike, irrespective of Oval Office politics, and Trump appointee Jerome Powell has been the central bank’s top decision maker during the most recent rate hikes. It’s possible Trump was referring to a different interest rate, though 30-year mortgage rates were never below 2.65% during his presidency and never rose above 7.76% during Biden’s, and the bank prime loan rate, which tracks small business loans, only went as low as 3.25% under Trump and as high as 8.5% under Biden.

CONTRA

Though littered with falsehoods, Trump’s speech Thursday reflects the frustrations of many Americans even as the stock market, economic output and wages all sit at record highs. A majority of Americans falsely believe the U.S. is in a recession, according to a Harris poll released last month, indicating the pain many feel as the economy continues on its uneven recovery from the sudden shock induced by the COVID-19 pandemic. Consumer sentiment is 14% lower than it was in Dec. 2020, according to the widely cited University of Michigan survey. A higher proportion of American voters believe Trump will better oversee the economy and inflation than Biden, an April ABC News/Ipsos poll found.

KEY BACKGROUND

Inflation was relatively stable between the Great Recession and the pandemic, never rising above 3.9% between 2009 and 2019. Prices shot up in 2021 and 2022 in the U.S. and abroad, with inflation in the Eurozone actually peaking at an even worse 10.6% in late 2022. The uptrend in U.S. inflation was tied to myriad factors, according to economists, including soaring energy and commodity prices stemming from Russia’s war on Ukraine beginning in early 2022, Covid-related supply chain backlogs at the turn of 2021-22, and an influx of available cash from stimulus checks approved under both Biden and Trump.