It’s a curious paradox: people say they want prices to drop, yet the very thing they’re asking for could set off the kind of economic chain reaction they’d rather avoid. Groceries have climbed 25 percent in five years, housing costs have surged up to 30 percent since 2020, and the average new car now costs more than $50,000. These numbers fuel frustration and political promises, but economists caution that broad price declines true deflation can be far more damaging than stubborn inflation.
Matt Colyar at Moody’s Analytics put it bluntly: “As terrible as inflation is, that is really undesirable,” he said, using the term for the economic fallout that occurs when prices broadly fall. Francesco Bianchi at Johns Hopkins said that if prices suddenly returned to pre‑pandemic levels and wages did not retreat accordingly, companies would find themselves unable to pay payroll, which can lead to layoffs and recession. Laura Veldkamp at Columbia Business School said that even the expectation of falling prices can freeze demand: “As soon as we believe the prices are going down, demand will plummet and we’re likely to immediately have a recession.”
This is why, despite inflation easing from its 2022 peak of 9.1 percent to 3 percent today, overall prices remain about a quarter higher than before the pandemic. Gasoline and eggs may fluctuate, but the broad inflation that has seen into every corner of the economy doesn’t simply unwind. As the World Economic Forum notes, deflation is rare but dangerous shrinking demand, cutting jobs, and deepening downturns.
Last month’s rollback of tariffs by President Trump on more than 200 food products, including coffee, beef, bananas, and cocoa, was pitched as a step toward affordability. Industry groups like FMI called it “a critical step,” and some importers expect to drop prices once existing high‑tariff inventory clears. But supply chain experts surety relief will be slow. Zachary Rogers, of Colorado State University, said goods bought under higher tariffs are still moving through warehouses, and “supply chains do not react that quickly to pricing actions.” Even when tariffs disappear, companies often keep prices flat rather than cut them, wary of having to raise them again later.
The practical impact may be modest. Imports make up less than 20 percent of US food purchases, and many major suppliers like Mexico were already exempt from tariffs. Other forces-like droughts affecting coffee and cattle, or higher aluminum costs from steel tariffs-continue to push prices up. As agricultural economist Daniel Sumner put it, “Would that make food cheaper in the US? Yes, a little bit, but not that much, because most of what we’re buying are services.”
Economists believe that the greatest promise lies in addressing the structural cost drivers, especially in housing and health care. In the case of housing, the usual remedy proposed is the easing of zoning rules, but critics of the YIMBY movement note that, for example, reducing minimum lot sizes won’t trigger construction if the infrastructure costs, impact fees, and financing hurdles remain high. Unless these are addressed, increasing density allowances in and of themselves will not bring affordability.
Healthcare costs remain another intractable front. Premiums have increased simply because the price of services continues to rise, not because Americans are consuming more care. The Affordable Care Act’s subsidies have cushioned the impact for millions, but with improved premium tax credits scheduled to expire at the end of 2025, 2026 could bring median premium hikes of 18 percent and for some middle‑income households losing subsidies, increases over 80 percent. That could squeeze healthier individuals out of the insurance pool, raising costs further for those remaining.
Beneath all of this lies what scholars call inflation inertia, driven by a distributional conflict where workers strive for higher real wages while firms defend profit margins. Once the supply and demand shocks have subsided, these aspiration gaps can continue price increases. Without a social consensus to balance income claims, inflation may continue for long after the shocks initiating upward price pressure have passed.
For financially strained households, it’s a tiring reality. An estimated 72 percent of Americans feel stressed about money; “sticker shock” from rapid price increases heightens the anxiety. Experts advise focusing on resilience, including regular financial check‑ins and realistic budgeting, in addition to limiting exposure to stress‑inducing news. For their part, employers can also offer support through various financial wellness programs or benefits that could help alleviate cost pressures.
Yes, lower prices sound like the cure, but the economics-and the lived experience-suggest the more durable path forward is targeted relief in key cost areas, policies that boost incomes, and strategies to manage the psychological toll of high living costs. In a world where broad deflation is a red flag, the goal isn’t to throw the economic car in reverse-it’s to steer it steadily toward a sustainable pace.
