Americans are understandably frustrated with the cost of living. In the aftermath of the pandemic, prices for nearly everything — groceries, rent, cars, insurance — surged in a short period of time. Inflation peaked around 10 percent in 2022, and although the inflation rate has since returned to something closer to normal, the elevated price level remains. People still feel squeezed because their paychecks have not fully recovered the purchasing power they lost during the spike. The frustration is real, and it has a clear economic explanation.

         Much of the public debate has been clouded by a basic misunderstanding of inflation itself. Inflation measures the rate at which prices rise, not the price level. When inflation falls from eight percent to three percent, that does not mean prices decline; it simply means they are rising more slowly, i.e., rising at 3% per year instead of 8% per year. The only way to make prices fall broadly is through deflation — a sustained drop in the overall price level — and both economic principles and experience  show that deflation is only accomplished by constraining the economy into severe recessions. Promises to “bring prices back down” ignore this reality. Once a price shock occurs, the economy cannot simply be  unwound.

         The pandemic created enormous supply‑side disruptions: factories closed, shipping networks broke down, labor markets shifted abruptly, and consumer demand changed overnight. These shocks produced a rapid jump in prices. What did not kept pace was the wage rate.  Even though pay has recently been rising faster than prices, for many it still has not fully closed the gap created by the initial surge. The result is a lingering loss of purchasing power compared to pre‑COVID conditions.  

         The responsible goal for policymakers is not to push prices back to 2019 levels. It is to foster policies that raise purchasing power so that Americans can afford the lives they built. That requires supporting productivity growth, easing supply constraints, and avoiding policies, such as broad tariffs, that unnecessarily raise household costs. It means focusing on long‑term labor‑market strength rather than chasing the illusion of price-level rollback.