Sources of America’s Hidden Inflation

This article appears in the December 2025 issue of The American Prospect magazine. Subscribe here. Prices have been rising across the economy in ways that are both visible and opaque. There are short-term drivers of inflation due to President Trump’s mismanagement of the economy. But the deeper drivers result from the degradation of capitalism. For example, the lethal combination of digital technology and tech monopolies picks your pocket in countless ways. Instead of technical advances leading to greater convenience and lower cost, as they logically should, they create strategies for opportunistic price hikes. More from Robert Kuttner When Amazon uses its deep knowledge of consumer preferences to rig markets and undermine competitors, higher prices are passed along. When HP makes it illegal or impossible for consumers to use cheaper non-HP cartridges in their printers, it can charge exorbitant prices. If you are prohibited from repairing your own car or your own iPhone, or as a farmer, prohibited from saving seed for next year’s planting, that invites monopoly profits built on higher prices. Costs rise because the rules are rigged. It isn’t just the increasing cost of health insurance, but the tax on your time when a health system of byzantine complexity requires you to waste hours to get a simple referral or get a claim paid. Middlemen and algorithms, both in the business of denying claims, are a direct cost to the system and a source of rising out-of-pocket prices to patients. If insurance doesn’t pay, you do. These middlemen also function as a drain on doctor time and thus a tax on doctors’ incomes, as well as a debasement of medical services In this special issue of the Prospect, we take stock of several hidden drivers of rising costs. David Dayen explores all the ways that technology allows sellers of any product that uses the internet to take advantage of surveillance capitalism to personalize prices and charge more than the market price that would be produced by ordinary supply and demand. It’s another case of monopoly pricing power, facilitated by invasive technology. The remedy for opportunistic price hikes in so many sectors is the resurrection of antitrust. As Emma Janssen writes, plutocracy is a driver of the affordability crisis. The top 10 percent of income earners now do close to half of the spending, by some estimates. This has led to “premiumization,” where airline seats, concert tickets, and even staple goods are priced for wealthier people because they are the primary buyers. That in turn drives prices higher for everyone else, as anyone who buys a ticket to a concert or a sporting event appreciates. Antitrust policy has thus far failed to curb obvious abuses by middlemen ticket sellers. Paul Starr writes in a sidebar that these trends invert the 20th-century pattern of affordable culture, beginning with nickel movie tickets and cheap bleacher seats. As the concert ticket example shows, middlemen are drivers of the affordability crisis. As Whitney Curry Wimbish writes, across the economy, from pharmaceuticals to real estate to meatpacking and more, middlemen sit in between suppliers and customers and squeeze out a layer of profit for themselves, taking advantage of their knowledge of industries and typically concentrated control of the supply chain. Regulatory capture, as James Baratta points out, is another source of price increases. Baratta’s focus is on electricity rates, and the failure of state public utility commissions to protect ratepayers from extractive price hikes based on dubious economic models used by utility companies. There is an even more subtle and insidious version of regulatory capture, in which regulations themselves are used to enforce industry’s anti-competitive strategies. As Cory Doctorow observes in his indispensable book Enshittification (reviewed in our October issue), far more sinister than traditional regulatory capture is regulatory fusion, in which industry designs laws and rules to thwart competition and raise profits. Using provisions of the industry-written 1998 Digital Millennium Copyright Act, Apple makes it a copyright violation for technicians to use non-Apple parts for most repairs to Apple products. The preposterous doctrine is that if an inferior non-Apple part caused the product to fail, that could reduce consumer confidence in Apple’s brand. There is even a name for this doctrine: tarnishment. TRUMP’S CONTRIBUTION TO RISING PRICES adds to these long-term abuses. Eric Winograd, a senior vice president at AllianceBernstein, calculates that Trump’s tariffs have added about one percentage point to the core inflation rate, though other estimates that account for Trump’s numerous exemptions of various products and industries put the number at 0.6 to 0.7 percent. But tariffs are only the beginning of Trump’s impact on prices. The remedy for opportunistic price hikes in so many sectors is the resurrection of antitrust. Internet innovators grew from purveyors of ingenuity and user convenience into extractive monopolies largely because antitrust enforcement ceased to exist from late in the Carter administration until Joe Biden’s appointments of some of the smartest students of abuses and their remedies: Lina Khan at the FTC, Jonathan Kanter at the Justice Department, Rohit Chopra at the CFPB, and Tim Wu (whose latest book is reviewed in these pages) as competition policy chief at the White House. Higher education and housing are unaffordable due to policy failures that predate Donald Trump by decades. These agencies had just gotten serious about reversing four decades of corporate market power when the antitrust revolution was reversed by Trump. As antitrust enforcement has been aborted, private equity companies have been buying up traditionally local firms in order to use market power to raise prices, in sectors as diverse as pest control operations, HVAC companies, and veterinary practices In addition, Trump’s shutting down of Biden’s industrial policies has raised prices. Electric power costs have lately risen far faster than the general rate of inflation. Trump’s policy of killing renewable-energy projects, in order to raise profits for oil and gas companies, contributes to this price rise, by taking away power that might otherwise come onto the grid and alleviate demand. So does the failure to regulate the extensive use of electric power by data centers used by tech companies. There was a time when we needed to shift to solar and wind in order to help address climate change. But now that renewables are cheaper than most fossil fuels, we need to make that shift because it saves money. Instead, Trump promotes more costly oil and gas. It is hard to quantify precisely how much all of Trump’s policies taken together have added to price inflation, but a very conservative estimate would be about two percentage points. That may not sound like a lot, but it is the difference between a baseline inflation rate of 2.5 percent and a rate of 4.5 percent. And that difference is not just a hidden tax on consumers. It has knock-on effects. With inflation at 2.5 percent, the Federal Reserve is willing to reduce interest rates in order to reduce unemployment. But when price increases approach 4 percent, the Fed worries more about inflation. At a time when unemployment rates are rising, policies that raise prices tie the Fed’s hands. This paradoxically could make things more unaffordable for low-income workers, if a loose job market keeps wages from rising. It’s not clear whether there will be any more rate cuts in the near future, and there may even be rate increases. A Fed policy of tighter money means that people pay more for their mortgage loans, their credit card debt, their student loans, and consumers pay more when small businesses pay more for credit. Trump’s cuts in programs such as SNAP and Medicaid are another form of indirect price hikes; even worse, they are price hikes that hit the poor. If your food stamp allotment is reduced, you have to pay more out of pocket in order to eat. If your Medicaid is cut, you pay out of pocket or do without. The failure to address climate change, and Trump’s reversal of long-standing policies aimed at preserving the environment, also add to costs. As destructive storms become more severe and frequent, the costs of recovery and of homeowner insurance relentlessly rise, some borne by consumers directly and some by taxpayers. This natural-world aspect of hidden inflation is addressed in another of our special articles, by Gabrielle Gurley. SOME YEARS AGO, THERE WAS A DEBATE among economists and policymakers about whether the Consumer Price Index should be adjusted downward to reflect improvements in quality. A 2020 car was simply a better car than a 1980 car, so some of the nominal price inflation actually represented a superior product. Likewise coffee: In 1970, a cup of coffee only cost a dime, but the swill was undrinkable. Coffee today is a lot more expensive, but it is palatable. In practice, the Bureau of Labor Statistics did some minor revisions to adjust for quality improvements. Today, we might need to do the reverse. We are paying more money for products and services whose quality has deteriorated. And in many cases, the deterioration has been deliberate. Indeed, the business model of the tech giants is to systematically degrade the quality of products and services. Products are needlessly complex from the perspective of the consumer, but the complexity adds to the surveillance. Same with tech services. This is the essence of what Doctorow calls enshittification. Doctorow tells the story of how Google deliberately slowed down its search process in order to make more time for its system to festoon the search results with annoying ads that embody everything that Google knows about the user’s buying habits. In conventional economics, wages and prices are two different aspects of the economy. But whether people can afford to live decently is a function of what they earn applied to what they have to pay to live. The same technology that allows tech monopolists to gouge consumers enables them to treat workers like serfs and evade the protections of labor law. As Harold Meyerson writes in his piece, the cost of living is higher because earnings are lower. And earnings are lower because of both the weakening of the labor movement and the sidelining of the National Labor Relations Board. In addition, tech allows employers to double down on the old practice of denying that workers are payroll employees protected by labor laws. From Uber drivers and UPS contractors to chicken farmers and fast-food workers, the company controls and monitors every aspect of the work, but the employer pretends that the workers are independent contractors. This represents a toxic marriage of app technology and market power. The effect is to batter down earnings. And as Naomi Bethune writes, all of the predations tend to hit racial and ethnic minorities harder, because African Americans and Latinos are more economically vulnerable to begin with. Trump’s war on DEI only increases the vulnerability. EVEN APART FROM THE PREDATIONS of extractive and invasive capitalism, other sources of the relentless rise in prices are the result of policy failures that predate the abuses of surveillance capitalism and Donald Trump by decades. Housing is out of reach for so many Americans because America has failed to build enough houses. Houses were cheap after World War II mainly because cheap farmland was being converted to suburbia, with the help of federal highway and mortgage policies. The cheap land is gone, and homebuilder consolidation has distorted markets. Trump’s tariffs have caused a rise in building costs, and his proposal to privatize the secondary mortgage market would make financing more expensive. Housing tax breaks are tilted toward more expensive homes, and toward homeowners over renters. The sheer purchasing power of the oligarchy also bids up prices. Local regulatory barriers also raise costs, but many zoning restrictions also reflect the political power of oligarchs, who don’t want riffraff in their neighborhoods. The bipartisan failure to regulate new financial scams such as subprime mortgages added to the pressure on housing. Millions of homeowners, disproportionately Black and Hispanic, lost their homes in the wake of the subprime collapse. Congress passed legislation to allow for mortgage refinancing for duped homeowners, but the Obama administration failed to carry it out. You might think that scads of vacant and foreclosed houses would lead to lower prices via the law of supply and demand. But the same regulatory failure led private equity companies to swoop in, buy houses, and jack up prices and rents, while making homebuilders reluctant to build the additional units we need. Public policy has also failed to produce an adequate supply of affordable rental housing. The rental housing that we do subsidize is done in wildly inefficient ways, for the convenience and profit of landlords and developers. Our failure to have a true social-housing sector reflects power imbalances between oligarchs and ordinary citizens. The cost of higher education is out of sight because legislators, Republican and Democrat alike, permitted universities to inflate costs via the student loan program, and then piled debt onto generations of students and graduates. State legislatures compounded the damage by reducing direct appropriations to public universities that were free to state residents until a generation ago, substituting tuition and fees. It now costs more to attend a state university than what a private university cost when I was a student. Health care costs also keep rising because the United States has failed to adopt an efficient program of universal public health insurance, as every other major country has done. To compound the damage, policymakers have allowed a plague of for-profit middlemen to take over hospitals, nursing homes, and doctors’ practices. In many hospitals, people of means hire private nurses because the hospital’s own nursing staff is so stretched thin and overworked by cost-cutting aimed at siphoning profits. A hidden price hike, if you can afford it. If the U.S. had a universal nonprofit insurance system, it would save about 6 percent of GDP. That’s $1.2 trillion a year. THERE WAS A TIME WHEN THE ABUSES of capitalism were relatively straightforward and transparent. Large corporations sought to combine into monopolies. The remedy was enactment and enforcement of antitrust laws. Corporations tried to pay their workers as little as possible and to break their unions. The remedy was the Wagner Act, guaranteeing workers the right to organize and join unions. Bankers tried to swindle investors for their own enrichment. The remedy was tougher banking and securities laws, prohibiting conflicts of interest. Corporations tried to cheat consumers with tricky terms and shoddy products. The remedy was the pro-consumer legislation of the 1960s and 1970s. But today’s corporate and financial abuses are hidden in a web of algorithms and apps, reinforced by regulations that actually help tech companies cheat consumers rather than protect them. It takes a complex, deeply knowledgeable, and radical critique of capitalism as currently practiced to get serious about remedies. That does not describe about half of the current Democratic Party, which is on the take from these same industries. One of the many tragedies of Joe Biden was that he was a feeble spokesman for his own good policies. He hired the most knowledgeable people in the country to revive antitrust and apply it to new abuses. But Biden did poorly at narrating the significance of these policies to ordinary Americans coping with rising prices. As I’ve written elsewhere, many of these policies and people reflected the work of Sen. Elizabeth Warren, who was a superb narrator of what they meant and why we needed them. But we ended up with the soul of Elizabeth Warren in the feckless persona of Joe Biden. If we can make the heroic assumption that Trump will not be president forever, and that there will be an opportunity to pick up where Biden and Warren left off, America’s next leaders will need to be even more radical in their understanding and remediation of capitalism, which has become even more debased since Trump took office. This article appears in Dec 2025 Issue. Recommended Reading

View Original Article