Don't Underestimate Trump's Plan to Kill Higher Prices: He Knows Exactly What He's Doing

James Carville once famously quipped, "It's the economy, stupid." This phrase still resonates today because, in many ways, it's true. People often vote with their wallets, and while by far it wasn't the sole reason for Donald Trump's historic comeback in 2024, it played a significant role.

As I've mentioned before, we can't simply erase past inflation and suddenly see lower prices at the grocery store or for other items that we buy. Inflation is a past event. It has already happened. The only thing that can truly bring prices down is deflation, and one doesn't need to be a master economist to understand that deflation is worse than inflation.

However, there is one area of our economy that has the potential to reduce costs on goods and services and profoundly impact the overall economy.

The cost of energy.

Energy costs are factored into every aspect of everything we buy because energy is a crucial part of production and transportation.

Factories rely on electricity to run their machines, while trains, ships and trucks all run on diesel. Although the cumulative inflation we have experienced over the past 3 1/2 years was not solely due to energy costs, they still represent a significant portion. By reducing these costs, the savings can be passed on to consumers, potentially lowering prices.

This is a crucial aspect of Donald Trump's plan to alleviate some of the pain we've endured. It addresses at least some of the root issues that were a contributing factor to inflation in the first place. By opening the U.S. to more exploration and drilling, we can better control our energy costs.

The thing is, and it's very important here, that it's never been about price gouging. And of course, I think most Americans outright rejected that ridiculous claim anyway. "Mrs. Harris," the American people said. "If you think that's why prices are higher, you have no real idea how to make them lower." It's one thing Trump does understand and made it a point to make it a strong part of his campaign.

Granted, some may argue that businesses will just pocket the savings and keep prices the same. Those damned greedy corporations, right? But I believe businesses are fully aware that Americans are simply exhausted by higher prices. They've had enough, and consumer pullback from spending has clearly shone to be a real thing that could have a very negative impact on business' bottom lines.

Discretionary spending has slowed significantly. People have been opting for store brands over name brands and cutting back on fast food. Businesses are suffering more than people realize. The reality is, they can't just charge whatever they want and expect to get it. Consumers decide.

Again, this absolutely denies the idea that price gouging is not only a thing, but any real benefit to businesses who would engage in it.

In other words, gouging customers would literally be biting the hands that feeds them, and in the most fundamental of ways, it makes no sense to do it. They aren't dumb. They know their customers and what drives them.

Any good business, if it wants to be successful, knows full well what makes their customers come and what makes them go away. And they know customers are tired. Their wallets are worn out at the seams. Companies will be more than eager to pass along any cost savings to consumers because they desperately want to regain customer confidence and have them waltzing back through their doors.

Trump understands the economy. He knows how money moves and what drives spending. So naturally, it makes sense that he's going to target the very things that make an economy thrive and grow and home in on stimulating the economy in a way that supports more jobs and even better wages. And if wages can grow, we can catch up to past inflation more quickly.

Energy is the first step in the bigger picture plan Trump has—an important one, but just the beginning. What drives an economy? Money. The more people and businesses have, the better the economy performs. Trump understands this. By lowering costs, reducing prices, and cutting taxes, you essentially put more money in everyone's pockets to spend on what matters most.

Commerce.

Even for those who argue that Trump's tariffs could negatively impact efforts to reduce consumer costs, I think they are thinking about this rather narrowly. There's more to consider. His threat of tariffs, combined with his desire to cut the corporate tax rate to 15% could have more benefits than drawbacks. These measures not only encourage businesses to operate within the country, but it also incentivizes other businesses to open new factories or return labor to the U.S.

It's the economy, stupid, is right. James Carville nailed it. But I think the more important thing here is that the person we put in charge understands how to make it go. And I think Trump does. It doesn't mean there isn't still a long road ahead. It doesn't mean it will be easy. The impact won't be felt overnight. But what we do know is that Trump will be leading the charge day and night, putting in place ideas and policies that can have a major positive impact on our wallets and more importantly, giving people back a large portion of the spending power that was stripped away from them during the Biden years.

If people are busy trying to poo-poo what Trump is proposing, I think it's simply because they don't understand what he knows and aren't willing to more deeply explore what it is he's actually up to. The worst thing one can do is underestimate Trump's intelligence. He's way smarter than most would ever dare give him credit for.

It won't be long before that becomes all too evident that he knows exactly what he's doing. Mark my words on that.

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© 2024 Jim Bauer

Just Tell Me What It Costs, Man

There are few things I agree with the Biden administration on, but the one thing I do agree with them about are getting rid of junk fees, which have even become a very big thing for restaurants to charge customers.

To me it's simply a way to raise prices without actually raising prices. And even what restaurant owners say about it seems to suggest that. "Customers might be discouraged if they see their menu items costing more."

Sure. But what's the difference if the menu says my hamburger costs $10 but when I get the bill it actually costs $12?

Many restaurant owners say the fees help them to better navigate higher wages, health care costs and other business-related expenses, and to keep menu prices down. But whether you charge more on the front end or the back end doesn't matter. Just because you call it a fee and not a price doesn't mean consumers are getting any benefit from it.

They are still ultimately paying more. And frankly, consumers are tired of it. It's akin to being nickeled and dimed, and often times the fees are hidden—such as resort fees some hotels charge for services that should be included in the price of your stay.

"It's to pay for fresh towels and for a maid to toss your sheets."

Well, last time I checked that's part of what my hotel stay is supposed to include. So, why charge me a fee for that? 

Of course, the hope is that consumers will just get used to these things. Like paying to check in a bag to fly somewhere. "It's just a part of the cost of flying," they hope consumers will say. But the thing is that once fees start, where do they end? 

What exactly is a convenience fee charged at a restaurant, for example? Oh wait. I didn't have to serve myself and therefore I enjoyed the convenience of having someone cook my food and serve it to me. That should come with a price on top of my menu cost.

Of course, that's the reason I go to a restaurant in the first place. I am already paying three times the cost of making the same meal at home. Now I have to pay even more?

What consumers want is transparency in pricing. We understand that the price we pay for things is directly related to whatever costs are incurred by the business. If it's got to be included in the price, so be it. Tacking on additional costs at the end of the bill serves no purpose except to add further shock to the entire cost of the meal.

On top of that, while restaurants claim the fees help workers, I think the opposite is true. We are already, as consumers, inundated with extreme tipping—many consumers are going to say, "If you add a fee I won't tip as much."

Granted, it's a bit of tit for tat argument when you think about it. But for me it's the semantics that matter most. Whether you charge me a fee or raise my price, the end result is the same. Tricking me into thinking my hamburger costs less because it says so on the menu, only to charge me more in the end, is moot.

I mean, think about it, what if I went to a gas station and pumped my gas and then they charged me a fee for the use of the pump?

What happens as well is that once you start adding one fee, suddenly you slowly start adding more. And before you know it, you're paying dishwasher fees for the clean plates and silverware, and maybe even a gas fee for keeping the griddle hot.

The fees simply serve no purpose, and I think getting rid of them is a good idea that best serves consumers interests, plain and simple. It's a commonsense idea. Tell me what something costs, and I will automatically assume that all costs of the business are built into what you charge me.

Just like it has always been. To keep the fees is to have the waiter coming to your table with a smirk as you dab your lips with your napkin, "Psst, by the way..."

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© 2024 Jim Bauer

Harris Wants to Ban Price Gouging on Groceries: Clearly, She's Out of Touch with Reality

Is it just me, or is anyone else getting the passing of the buck on inflation that has been dealt time and time again by the Biden administration, and now Harris, as she campaigns following Biden dropping out of the race?

She wants to propose a federal ban on "corporate price gouging" on food and groceries if she is elected.

Sure, some grocers, namely meat packers, have enjoyed record profits. But is that a result of price gouging and greed? The fact is that inflation is here because of the policies that Joe Biden put into effect that caused prices on everything to skyrocket.

You can even pin the damn timeline!

Within hours of Biden taking his oath of office he signed executive orders reversing Trump's energy prices and in March of 2021 he signed the American Rescue Plan into law, and by December 2021 inflation jumped to 10% and has risen year over year since well beyond the desired 2% rate the Fed prefers.

This inflation is not because of corporate greed. It is because of Biden's policies, which presumably would become Harris' policies if she is elected. What it should tell voters is that her eye is not on the ball. If she won't admit responsibility for the inflation, how can we expect her to have the right ideas to solve the issue?

To my mind, it's just the wrong focus and someone needs to call her out on this, and hard and fast. Perhaps Trump will do that and lay out exactly why we have inflation, which is for reasons other than the now Harris campaign is trying to sell us on.

I think the silver lining is that most Americans do know where the real blame lies. Based on the polls, Trump is still winning handily on the economy. But the problem is that there are enough haters of the rich who will side with Harris and give her a pass and agree with her.

But it won't solve the problem, of course, because it doesn't get at the heart of the cause. Beyond that, this will only put more restraints on businesses to operate profitably and effectively, and who does that hurt?

It hurts the consumer, and it hurts the workers.

It hurts the consumer because if suddenly a business is accused of gouging, it's going to have to adjust the way it makes its products. Quality may be compromised as recipes are tweaked. Packaging may change to adjust for the accusation.

And of course, if businesses make less profits, they can't pass any of that along to workers in terms of benefits and wages—or even new job creation.

You don't encourage a strong economic environment by stifling growth and progress in business. You encourage it by fostering growth and progress. Beyond that, you have to first prove gouging is happening, and I question how on Earth you do that?

What measure will be used to determine what a fair price is and what isn't? What method will be determined to decide whether a profit is good or exaggerated? How do you tell a business, "This is how much you can legally make on this item?"

It's more dictation and control over things the government has no business controlling or even deciding, for that matter.

The thing is that Harris really has no plan to tackle inflation at all, but because inflation is still here and it's a major concern to Americans, she has to say something. She has to at least look like she is interested in doing something about it.

Even Biden said price gouging was happening. If they truly believed it was, they'd have already done something about it. They haven't because, of course, it is something that only lives in their imagination and they are hoping the American people will join them on their fantasy trip.

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© 2024 Jim Bauer

It's Not Price Gouging, It's Survival

The Democrats are trying to sell the idea that businesses are price gouging their customers. Of course, we all know that's not true. But it's a nice and easy way to pass on the debilitating effects of inflation and put the blame somewhere other than on their policies which are at the root of what's causing it.

The rising cost of labor, which the Democrats have long been pushing for, are not without their own contribution to the higher costs we are facing everywhere. It's not the only reason for the inflation, of course. But it doesn't help.

Fast food operators, for example, in California are being slaughtered by the $20 minimum wage.

The reality is that price gouging can't occur. That's not to say it never happens or even that it can't happen. It simply has limits. So, the reality is that it isn't happening, and that is evidenced by fast food businesses in particular having to do all sorts of things to ramp up business since customers are not eating at their restaurants as much due to the higher cost to do it.

In other words, you can't just charge whatever you want and expect customers to automatically pay it. If that were the case, the fast-food chains wouldn't be seeing their sales suffer.

As a general rule, the markets dictate what things cost, outside of external factors of course. Inflation, for example. But generally speaking, a business can only charge for its goods and services what the market is willing to bear.

It wasn't that long ago when a family of four was out and about on a weekend and stopping by for a quick bite at McDonald's was a reasonable proposition. Now that quick stop might cost upwards of $100. So, it's much more of a consideration than it was before, and many people are simply saying no.

It's just not worth it.

As a result, instead of gouging customers, fast food chains are revisiting value menu concepts. But those come at a cost. Even though when these value menus first arrived on scene, they were very profitable business drivers, that's not the case now.

The difference is we didn't have inflation and people had more disposable cash. People were more willing to upgrade their orders and buy higher margin menu items on top of their $1 McChicken sandwich, for example, that helped to defray some of the costs of offering cheaper menu items to customers.

Almost all of the fast-food chains are rolling out some type of value offering. McDonald's offers a $5 value meal, Burger King is rolling out a $3 offering and Wendy's has an offering of their own as well. 

It hurts the business, as most franchisees will say. These items are being sold at cost and sometimes at a loss, and so the hope is that customers will do the same as before when considering value items and add higher margin items to their order.

But again, with inflation, they may not be as willing to do it.

The bottom line is that businesses are dealing with the impact of the rising costs of doing business just like everyone else is dealing with the higher cost of living on everything else. There's no gouging going on here. Because again, the market is not willing to bear any cost. Businesses are at the whim of their customers, not the other way around. And in many ways, while it is painful at least in the short term, in order to keep customers walking through their doors, they are willing to lose a little money in the process.

The last thing these restaurants want is for customers to opt for staying home for lunch rather than considering what was before a fairly economical prepared one.

When my wife and I could opt for a quick bite out when we were running some errands and it only cost around $10, it was rarely a second thought. But when that same trip costs $30, you think twice about it. "Is it worth it?" Most people are saying no. Not when I can go home and make a sandwich and maybe even toss a few chips on my plate for under $2.

Businesses are out to make a profit. It's the whole point of being in business of course. And in order to do that, you need customers, and you won't get them at any cost. The villains are not the operators. They are victims just like the rest of us of the impact of higher wage demands and inflation—and they are running out of workarounds that work.

If price gouging was a thing, businesses would not be having to consider loss leaders to keep customers coming in.

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© 2024 Jim Bauer

The Point of No "Return" in Pricing

Beer sales might be a strange way to talk about the point of no "return" when it comes to inflationary pressures. But here I am talking about it.

The thing is, during times like these when prices are rising faster than paychecks and there seems to be no end in sight at the register for paying more for just about everything, many businesses get accused of price gouging.

In the eyes of some consumers, there must be something shady going on here.

And I will admit, sometimes it certainly feels that way. Like how convenient it always seems to be that right before a weekend or especially a holiday weekend, gas prices suddenly shoot up. And I feel that way even though I understand certain macroeconomic things that factor into why that happens—and it has nothing to do with price gouging.

Inflation is also not a product of or a result of price gouging.

The simple fact of the matter is that when inflation hits, it hits everyone. And businesses are not immune to it any more than anyone else is. The cost of raw materials goes up. The cost of utilities to run the machines go up. The cost of wages possibly goes up. The cost to transport finished product goes up. Every aspect of the cost of running the business goes up.

And in order to maintain their margins and remain profitable, so does the cost they sell their products for go up.

But like most things, there is a limit here. There is only so much a customer will pay for something before they finally decide it costs too much and leave it on the shelf. This is the point of no "return" on the prospect of raising prices to protect margins.

In other words, at some point the customer will simply refuse to pay the higher price such as what happened with beer maker Heineken. They raised prices enough that consumers finally said no, and their sales dropped over 4% in the last quarter as a result.

Granted, there are certain things that consumers have a need for regardless of how much it costs. Certain foods, for example. Gas for the car. But even on those two things there are certain things that consumers we can do to curb costs. 

They really don't have us by the balls at the end of the day as much as we may want to believe that.

Consumers still have the power to send a message, and many do. When egg prices hit $4 and $5 per dozen, I simply stopped eating eggs. And did so for 3-months. And I don't think I was the only one, because one thing I observed when I went into the grocery stores was that eggs were always fully stocked.

People were not buying them. Demand for eggs plummeted. Egg prices came back down. 

Granted, the costs driving the prices up didn't change. In fact, because inflation is far from done, costs actually continued to rise. So, now the businesses have to make a decision. Either allow product to rot on the shelves and not get paid anything for it or sell it cheaper and suffer through a period of lower margins.

And that's exactly what you are seeing. More and more businesses are reporting lower sales numbers due to higher prices but are also reporting lower margins. Many are saying, "We have simply reached a point where we can no longer afford to raise prices and stay afloat even if we lose money or experience lower margins on every sale."

Heineken, as an example, knows that the more it continues to raise prices in order to compensate for higher production costs, the more customers they will likely lose as a result. It's a no-win situation. 

So, as much as we like to think that the companies are simply trying to take advantage of us, the reality is that they're not. In fact, they cannot. Especially in areas where there are alternative options for consumers to choose.

There is a flip side here, as there always tends to be, and that's that consumers pulling back and saying no actually helps to curb inflation. It weakens demand and with less money pouring into the economy, suddenly things slow down economically, which is a primary ingredient to combatting inflation.

There may be a short period in between all of this before inflation really comes down when businesses may hold certain prices to try to recoup what they lost when margins were lower. But even that will be short-lived. Because consumers do see the news. If they see that inflation as a whole is waning but prices aren't coming down, there will be backlash for that.

As it has always been said in business, the markets will charge what the markets are willing to bear. And when it comes to that, there is a point of no return. There is a point at which consumers will ultimately decide what prices should be. And businesses will either have to pay attention or risk losing their business.

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Quick Shout: Aluminum Prices Are Down, Not Up

Despite the Aluminum Tariffs, Aluminum prices are DOWN 4%. People are surprised, I’m not! Lots of money coming into U.S. coffers and Jobs, Jobs, Jobs!

— Donald J. Trump (@realDonaldTrump) April 6, 2018

IT MAY WELL BE A SHORT TERM EVENT. IT MAY EVEN BE AN ANOMALY. REGARDLESS OF WHAT IT IS, THE FACT IS THAT ALUMINUM PRICES ARE DOWN, NOT UP, SINCE PRESIDENT TRUMP IMPOSED A 10% TARIFF ON IMPORTED ALUMINUM.

And POTUS is right to tout this, and to point that out, as he indeed did in a recent tweet.

I said a while back, after so much hoopla surrounding the president's decision to impose steel and aluminum tariffs that he knows what he is doing, and that when you get right down to the brass tacks of the matter...

Tariffs are not what this is all about. (If You Think Steel Tariffs Are About Steel Tariffs...You Are Missing the Point)

It is being reported that aluminum prices are down 4% since Trump announced he would impose the tariffs. I also said that you shouldn't be surprised that not everyone gets what these tariffs actually wish to achieve...

And beware anyone selling anything made out of steel or aluminum will gouge you with no foundation whatsoever for what they are doing—that they will do this based solely on the IDEA that all tariffs are bad, and that the only logical conclusion can be that tariffs will drive prices higher.

And yes, there is historical data to suggest that that could well be the case if what Trump wished to achieve was only to impose a tariff.

And as I said, that's not what his intention was at all. In the most basic of terms what I said was that Trump's intent was to level the playing field, force bad players to play fair, and more importantly to open a dialogue.

Like I said before, any prices on the end product are simply false increases. Reactionary increases. And pure gouging. The president has this, and I think it will be clear on all fronts when all is said and done that the market will stabalize, jobs will be left intact, and all of this chatter that we're creating a trade war and sinking our own ship will prove to be...

A pack of jibberish.