Election 2024: All Roads Lead to Inflation

What the Election Means for America's Purchasing Power

In an ideal free-market capitalist system, government elections should have minimal influence on economic and investing decisions. Yet, in today’s economy, government intervention has expanded dramatically through stimulus checks, debt forgiveness, and tariffs, fostering a form of capitalism lite. The government’s growing role in the economy has left voters and investors alike grappling with the consequences, mainly inflation.

At The Coastal Journal, we analyze these developments through the lens of Austrian economics, guiding individuals to manage wealth and preserve purchasing power in a shifting economic landscape. While ownership of assets like stocks, gold, or bonds should not hinge heavily on which political party is in power, there’s an undeniable pattern since the U.S. abandoned the gold standard in 1971: persistent government spending inevitably fuels inflation. Whether the White House is red or blue, the result is consistent—an expanded money supply chasing finite goods, driving up prices. As the national debt will be $36 Trillion this year.

The ancient Roman saying, “all roads lead to Rome,” is a fitting analogy for modern fiscal policy: no matter the path, government action leads to inflation. For more on US inflation history check out these articles:

1. Modern Day Rome

2. US, When in Rome

A Historical Trend: The Inflationary Cycle

Presidents who sought to raise taxes on the middle class to pay for government spending —George H.W. Bush, Jimmy Carter, Lyndon Johnson, and now Joe Biden—either lost reelection or abandoned their campaigns. This reality has pushed politicians toward a less direct, but equally damaging, form of taxation: inflation. Through expansive deficits as this years deficit approaches $2 trillion during what many call a '“good economy”

and unchecked spending, the burden is passed to consumers in the form of higher prices. This isn’t just economic theory—it’s a reality Americans have faced for decades. As we approach the 2024 election, one thing is certain: all fiscal roads from Washington will lead to inflation.

The Roads: Harris Way vs. Trump Lane

The Road to Harris Way: Take a Left on Spending Avenue

The inflation crisis is front and center in 2024, with purchasing power eroding by -21% under the Biden-Harris administration. This inflation surge has crippled household budgets and delayed key life decisions, from home-buying to family planning—especially for millennials and Gen Z. While Americans may be earning more, they are enjoying life less as rising costs outpace income growth. This phenomenon, akin to the slow decay of ancient Rome, starts with minor increases in grocery or gas prices but eventually undermines wages, savings, and overall quality of life.

You can also check out this article on details of these failed policies here: Failed EV Spending

Kamala Harris’s Proposals

If elected, Kamala Harris proposes various programs that continue down the road of massive government spending, which will only add to inflationary pressures:

• Small business tax credit: Harris seeks to increase this credit tenfold, from $5,000 to $50,000. While supportive of small businesses, this adds to the budget deficit without balancing tax revenue.

• Price controls: Harris plans to crack down on grocery store price gouging, effectively imposing price controls—a strategy that has historically failed and led to shortages.

• Housing affordability: With home affordability at its worst levels in U.S. history, Harris proposes a $25,000 down payment subsidy for first-time buyers. Although this would help buyers, it will further inflate housing prices.

• Child tax credit: Harris supports increasing the tax credit for newborns to $6,000, which, like her other proposals, adds to the spending burden without clear offsets.

According to the U.S. government’s budget office, these plans would increase the debt by as much as $8 trillion. Higher deficits lead to higher inflation unless paired with significant tax increases and spending cuts, which Harris’s plans do not include.

Current data shows that Americans are most upset about the cost of living and these proposals wont help the matter.  More money without more production of goods just causes price increases.

As history has shown, pouring more money into the economy without increasing the supply of goods inevitably leads to higher prices—a fundamental principle of supply and demand that Harris’s policies would ignore.

The Road to Trump Lane: Make a Right on Tariff Street

Donald Trump’s economic platform revolves around tax cuts, tariffs, and government spending reviews. While his proposals are designed to curb inflation more than Harris’s, they come with their own set of challenges.

• Tax Cuts: Trump seeks to lower the corporate tax rate from 21% to 15% and eliminate taxes on tips, overtime pay, and Social Security payments. Though this would increase Americans’ disposable income, without cuts to government spending, the deficit would continue to grow. In terms of supply and demand, these tax cuts could boost consumer purchasing power, increasing demand for goods and potentially driving up prices.

• Tariffs: A key element of Trump’s strategy involves imposing tariffs on imports from countries like China, Japan, and Europe. While these tariffs aim to protect domestic industries, they act as a hidden tax on consumers. Higher prices for imported goods like iPhones could lead consumers to delay upgrades, ultimately reducing corporate earnings and hurting the stock market. Tariffs also reduce the overall supply of goods, fueling inflation.

• Government Budget Cuts: Trump’s proposal to enlist Elon Musk to review government spending could reduce waste and inefficiency, but it’s unlikely to fully offset the inflationary impact of tax cuts and tariffs. Unless these cuts are deep and strategic, the resulting demand increase from tax cuts could outpace any reduction in supply, driving prices higher.

In short, while Trump’s policies might moderate inflation compared to Harris’s, they are unlikely to prevent it entirely.

Market Impact: Stocks, Bonds, and Gold