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Hi Friends of the Patriotic Millionaires,
“Recession indicators” have been all the rage on social media over the last month. To avid scrollers, anything that was popular during the 2008 financial crisis that’s now making a comeback – from knee-high Converse sneakers, to Lady Gaga being back on the charts, to “Mamma Mia!” being back on Broadway – all signify that a recession is looming in America.
It might sound crazy, but the tongue-in-cheek recession indicator memes are actually on to something. Inflation has cooled considerably since its peak in the summer of 2022, but thanks to Trump’s escalating trade war, experts have warned that the odds of a recession and another bout of price spikes are growing. Life in America is already extremely expensive for most, but if Trump isn’t stopped, it may just become entirely unaffordable altogether.
For this week’s Closer Look, we want to give a rundown of where America is, and where America is heading, in terms of the cost of living. Specifically, we’ll share a few different numbers to highlight how high the cost of living has become over the last few years; identify the real driving forces behind rising prices; explain how Trump’s trade policies are bound to make things worse; and offer our own alternative proposal to get America on a better (read: cheaper) path.
The current cost of living in America
The Consumer Price Index, the most common measure of inflation, rose 2.4% over the year ending in May 2025. This is a great deal lower than the peak 9% rate America experienced in June 2022, and is close to the Federal Reserve’s 2% target rate. That’s the good news about the cost of living in America.
Now, here’s the bad news. While it’s certainly a relief that prices aren’t rising nearly as fast as they were three years ago, the reality is that they aren’t falling and are still unacceptably high to consumers. In all, prices are 23.7% more expensive than they were in February 2020 before the COVID pandemic began. The price of eggs may have (shockingly!) declined last month – down from $5.12 per dozen in April to $4.55 in May – but they are still 109.6% more expensive than they were five years ago. In all, of the 400 items for which the Bureau of Labor Statistics tracks prices, just 25 are cheaper today than they were five years ago.
During the 2024 election, where the economy and inflation were the top issues driving voters’ decisions at the ballot box, former Vice President Harris tried to push out the message that wages had actually risen faster than inflation and had essentially canceled out its effects. Technically, she was right: no matter which way you look at it, average wages ultimately rose faster than prices between 2019 and 2024. But the key word there is “average,” as some unlucky workers actually saw their inflation-adjusted wages decline over that period. Also, prices for essentials like housing and food rose faster than wages; as a result, low-income workers who spend a disproportionate amount of their incomes on these necessities may, in fact, have seen their purchasing power decline.
Finally, another often overlooked way to get a sense of how Americans’ wallets are faring is to look at how much debt they’re lugging around. We looked, and it’s not pretty. Americans’ debt on everything from credit cards, mortgages, and student loans now stands at a record $18.04 trillion. Credit card debit is particularly worrisome: it’s risen 51% since 2021 and is also at a record high of $1.21 trillion. And credit card delinquencies? Roughly 12% of Americans carry credit card debt that is thirty days delinquent, which is higher than what we saw during the Great Recession.
In short, these numbers show just how unfunny the truth behind those funny “recession indicator” memes really is.
The driving forces behind the sky-high cost of living
So how did we get here? How did life become so crazy expensive in America, enough to put us a stone’s throw away from a recession?
Trump has blamed former President Biden and the Democrats for the inflation crisis we’ve climbed down from over the last few years. Specifically, he blames their “reckless spending” – with both the American Rescue Plan and the Inflation Reduction Act – for overheating the economy, which created a situation where demand for goods and services outstripped supply and subsequently caused prices to spiral.
Like with most other things, Trump is wrong. It’s true that demand increased as the economy rebounded from the COVID pandemic, but the president conveniently fails to mention that it was predominantly driven by high-income earners. Flush with gains from their stock portfolios, real estate holdings, and other assets, the top 10% of earners splurged big-time on things like vacations and luxury products. On the other hand, between September 2023 and September 2024, spending by low- and middle-income households actually declined.
Facing bottlenecks due to COVID and Russia’s invasion of Ukraine, global supply chains could not keep up with high earners’ heightened demand in the post-pandemic period. This increased production costs for corporations, who then passed those costs onto consumers in the form of higher prices.
But there’s more to the story here. We know now that corporations actually raised prices on their products above what would have been necessary to make up for elevated production costs. In other words, they gambled that consumers would accept higher prices because of all the buzz over supply chain snarls, and took advantage of the situation to price gouge them. Their gamble certainly paid off. Over 40% of the rise in prices between the end of 2019 and mid-2022 could be attributed to fatter corporate profits. This continued into 2024 when supply chains unsnarled and production costs declined: in the first two quarters of the year, corporate profits were responsible for over 33% of price growth. The end result of it all was a record high of $4 trillion in corporate profits at the end of 2024.
Trump’s tariffs will make things worse
On the campaign trail, Trump promised to immediately bring prices down, but that’s obviously another broken promise in a long line of Trumpian broken promises. Instead, the president’s policies, particularly on trade, are bound to make life way more expensive than it already is for millions of Americans.
As of this writing, tariffs currently in effect thanks to Trump include: a 10% across-the-board tariff on most countries; additional levies on Mexico, Canada, and China; a 50% tariff on steel and aluminum imports; and a 25% levy on imported vehicles and car parts. (This may change on July 9 for many countries when the pause on Trump’s “Liberation Day” tariffs lifts.) In all, according to the Yale Budget Lab, Americans face an overall average effective tariff rate of 15.8%, which is the highest the country has seen since 1936.
Trump may think his tariffs are no big deal – to him, kids can live just fine with two dolls instead of thirty – but, in reality, they have the potential to cause serious harm. Tariffs have largely not reached consumers in the form of higher prices just yet, but that’s probably because businesses stockpiled inventories of foreign goods before Trump took office. But once they eat through them, the majority of economists expect inflation to tick up thanks to tariffs. The Federal Reserve is also deliberately holding off on cutting interest rates because, according to Chair Jerome Powell, they expect a “meaningful increase in inflation over the course of this year.”
Tariffs also could do harm by giving corporations yet another opportunity to price gouge consumers. They could use the excuse of widespread tariffs to raise prices, even on goods that are not affected. And there’s every reason to believe that they will do so. A 2020 study of tariffs that Trump applied on washing machines during his firm term found that companies also raised prices on domestic washing machines and clothes dryers, which were not subject to tariffs.
Our Alternative: The “Cost of Living” Tax Cut Act
There are a lot of things that lawmakers need to do to rein in the outrageously high cost of living in the United States. They need to raise the federal minimum wage to a living wage. They need to clamp down on corporate price gouging. They need to stop Trump from starting unnecessary trade wars. The list goes on.
We have another solution to offer: the “Cost of Living” Tax Cut Act, which is one of the four pieces of legislation in our legislative platform, The MONEY Agenda: America 250. It would do two things:
1. Provide a Cost of Living Exemption (COLE) on federal taxes up to a reasonable threshold for the cost of living for a single adult with no children (approximately $40,000 per year).
2. Implement a surtax on incomes over $1 million, transferring the responsibility for the lost revenues from the working class to the millionaire class. A 3% surtax would be instituted on income over $1 million and an 8% surtax would be instituted on income over $10 million.
We’re not going to pretend that this would solve the whole problem of America’s cost of living crisis all by itself. But it would provide meaningful relief to working people by guaranteeing that our income tax system does not tax them into poverty (or further into poverty), all while shifting the tax burden to wealthy people like us who can afford to contribute more.
Conclusion
We are five months into Trump’s second presidency, and from what he and his administration have accomplished so far, it's obvious that he does not care about improving the livelihoods of the millions of working-class voters that put him back in the White House. If he were, he would not be pushing the country down a slide into a massive and completely unavoidable recession.
Instead, just like in his first term, he is squarely focused on enriching himself and his fellow billionaire friends. Congressional Republicans are gearing up to pass their One Big Beautiful Bill Act over the next week, which will give massive tax breaks to wealthy people like us at great expense to working people. We’ll have a lot more to say about it once things are finalized, but it’s worth mentioning now to highlight yet another thing on the horizon that Trump is doing that will fan the flames of our cost of living crisis.
Lady Gaga, “Mamma Mia!,” and knee-high Converse sneakers are welcome to stay, but we want recessions to be a thing of the past. It’s a shame that Trump and Republicans feel differently given their policy pursuits, but rest assured, the Patriotic Millionaires will continue to do everything and anything we can to push lawmakers to make life more affordable for all Americans.
Warmly,
The Patriotic Millionaires
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