Donald Trump rode inflation back into the White House in 2024. “Do you feel better off now than you did four years ago, when I was president?” he asked while campaigning, over and over, after inflation peaked at over 9% in 2022.
Now inflation has smashed the Republicans, instead, leaving a long trail of lost Senate and House seats as well as governorships across the United States. A midterm hammering is an American ritual even for successful presidents, but this one is a savaging up there with the “Contract With America” blow delivered to Clinton in 1994, and the beatings dished out to fading presidents like W. Bush and Truman in their final terms. And perhaps only Trump could have put, of all states, Mississippi back in play for the Democrats — the last Democrat senators from there were old-fashioned mid-20th-century segregationists.
Poll after poll after poll shows US voters angry about the cost of living, and they blame Trump for it. That blame is correctly laid at the White House door: Trump’s chaotic tariff regime and his war on Iran in league with Benjamin Netanyahu have been crucial in pushing inflation higher and forcing the US Federal Reserve to lift interest rates. Out-of-control US government spending and a data centre boom cheered on by Trump haven’t helped, either.
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It’s not that US voters have changed. They remain unhappy about the US economic and political system and its failure to deliver for them, and the willingness of US political elites to ignore them in favour of special interests like tech billionaires or the Israel lobby. But Trump and the Republicans have been the US political elite for the past two years, after getting elected on a promise to address that resentment and grievance and start delivering for ordinary Americans. The result was another surge in inflation and another Middle East forever war — and a president who is effectively using the presidency as the biggest platform for corruption in US history.
The result is a warning to every incumbent democratic politician around the world: deliver for voters, or get replaced.
It doesn’t matter how right-wing and populist you are — if you don’t produce a higher standard of living, voters will switch, often back to the side they abandoned in droves just two years ago. “Woke”, “socialist”, “right-wing”, “populist”, even “terrorist”, which was directed by Trump at Michigan winner Abdul El-Sayed — the labels don’t register, no matter how often they’re dragged out, except with a small bunch of rusted-ons who don’t change their votes anyway. Most voters are focused on the economy.
And, as it turns out, you can’t trash basic economic rules with impunity. You can’t impose tariffs without the cost being paid for by your own consumers and business, not foreign suppliers. You can’t, even if you’re the United States, simply keep endlessly increasing debt in the tens of trillions without bondholders asking for higher returns. You can’t choke off a major delivery route for energy supplies without forcing energy prices up. You can’t pick trade wars with major trading partners without damage to your own businesses. And you can’t add massively to global economic and strategic uncertainty without a risk premium being added to everything.
All the excuses, the lies, the denials, the claims of being a stable genius, of playing 4, 5 or ∞-D chess, that this time it’s different, that it’s a golden age for America, don’t change that Americans were being punished every time they filled up their cars or bought groceries.
If American voters can shift in such massive numbers in just two years, rest assured Australian voters, who face the same recipe of higher inflation and interest rates, can do so as well, meaning Anthony Albanese’s massive majority of 2025 could turn into defeat — or minority government — in 2028.
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Albanese didn’t cause the Iran war (though he cheered it on initially), and his protectionism is mostly of the “waste taxpayer money” kind rather than tariffs, but there’s a similar element of denial going on about some basic economic rules. In particular, the role of government spending in contributing to inflation. True, Trump and Netanyahu, and the data centre boom are playing a major role in inflation here, but domestic demand is as well — demand that Labor is contributing to by continuing to run a budget deficit at a time when unemployment has been below 5%.
Labor’s deficit spending, unjustified by the state of the economy — indeed, only justified by its need to win the 2025 election — has had exactly the consequence economists predicted: inflating demand and pushing up prices, leaving the economy exposed to external shocks like the Iran war. Actions have consequences, whether the decisions are made in the ministerial wing of Parliament House or the White House. And they have political consequences as well. The blue wave that has just capsized the Republicans could easily have an equivalent here.
Albanese, Treasurer Jim Chalmers, and his cabinet at least have the luxury of time and perspective. They got lucky in 2025, our federal election being held just a few months after Trump’s return enabled Australians to see what happened when a populist lunatic who doesn’t think the rules apply to him gets power. If Labor is smart, it can get lucky again — by learning from the midterms that it needs to change direction significantly. And that starts with dealing with the causes of inflation that it has some control over.
