Now comes the test for Dems: household budget relief
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Democrats won the midterms on voter frustration with high prices. Now they face the same problem that sank Republicans: Americans want lower prices, and there is little that policymakers can do to deliver them quickly.
Why it matters: Prices for necessities like groceries and gas can fall in a healthy economy. But the kind of broad price declines that would reverse years of price gains would likely come with job losses and falling incomes, leaving households worse off than before.
- It sets up an early test for the incoming Democratic-controlled Congress and Democrats in statehouses across the country: delivering relief that voters can actually feel in their household budgets.
What they're saying: "Can you bring prices back to 2019 levels? No," Brendan Duke, senior director for federal budget policy at the Center on Budget and Policy Priorities, tells Axios. "But a lot of the price shocks are policy-induced, so there are ways that policy can reverse them."
- Duke points to reversing food assistance cuts, restoring health insurance subsidies and ending the Iran war as possible sources of relief, with the "big, fat asterisk" that President Trump might not sign off.
- Other economic problems — a potential rise in unemployment or the AI bubble bursting — could overshadow affordability without solving it, Duke says.
The big picture: Democrats have limited power over sources of pressure on household budgets.
- Their midterm sweep helped lower oil prices through market expectations. But Trump still controls the next steps in the war, and further relief heavily depends on his next moves.
- Congress could vote to repeal tariffs, potentially reducing costs for imported goods and American manufacturers. But Trump could simply veto that legislation (and more generally, there is no guarantee that businesses would pass all the savings on to consumers).
- Plans to restore expired Affordable Care Act subsidies or reverse Medicaid cuts could hit a wall because of internal divisions or Trump's veto power.
The intrigue: Democrats who won big Senate races campaigned on bringing down prices, including proposals targeting groceries and gasoline.
- James Talarico in Texas promised to lower grocery prices by rolling back tariffs and boosting competition. In North Carolina, Roy Cooper pledged to "make stuff cost less," while incoming Annie Andrews in South Carolina proposed suspending the federal gas tax.
- Democratic victories in governors' races could produce a patchwork of state-level relief, including directly giving voters money: The governor-elect of Texas, Gina Hinojosa, for instance, has proposed $1,500 rebate checks.
The other side: "'Affordability' seems to be the mandate for the new Democrat majority. So they need to either find a 'magic wand' to bring prices down quickly, or they need to ... give money to people (so the high prices are made 'affordable') yet again. Only causing more inflation," Jeff Gundlach, the billionaire investor and CEO of bond giant DoubleLine Capital, wrote on X on Wednesday.
What to watch: Prices don't have to return to their old levels for Americans to recover their purchasing power. That can come through a slower, less politically sexy process: wages growing faster than prices for a sustained stretch.
- But that bets on the possibility that there won't be another inflationary shock. And it has been a tough decade so far for such a bet.
Reality check: For all the Democrats' Congressional gains, they do not control the executive branch, will not have veto-proof majorities and it's generally the president, not Congress, who takes the blame when people are unsatisfied with the economy.
- Still, as Democrats look to win back the White House in 2028 and maintain congressional majorities, it would be nice to point to concrete action to help affordability.
