The Hollow Promise of Low Interest Rates

As President Trump touts the health of the US economy, the reality on the ground tells a different story. Despite his promises to slash interest rates and provide “rocket fuel” for growth, borrowing money has become more expensive, making it harder for families to afford mortgages or auto loans.

The government itself is feeling the squeeze, with debt service costs outpacing national defense expenditures. The Federal Reserve’s new chair, Kevin Warsh, acknowledged this week that inflation remains a problem but offered little in the way of solutions. Interest rates are rising even as Trump claims the economy is booming. The 10-year US Treasury note has surpassed 4.7%, its highest level in nearly two decades.

Trump’s economic messaging has been a central plank of his re-election campaign, but it appears to be falling flat with the public. A recent study by Georgetown University economists found that voters care more about whether their incomes are outpacing inflation than about low unemployment rates or solid consumer spending. Inflation has nearly kept pace with hourly wage gains over the last 12 months.

The administration’s attempts at addressing housing affordability have been half-hearted. Earlier this year, Freddie Mac and Fannie Mae were directed to buy $200 billion in home loans to bring down mortgage rates. However, Trump called a bipartisan bill aimed at increasing home construction a “big yawn” and allowed it to become law without his signature. As a result, 30-year mortgage rates remain stuck at 6.66%, essentially unchanged from a year ago.

Markets are not expecting interest rates to drop anytime soon, even as the Fed holds its benchmark rate steady. This is due in part to policy uncertainty and higher inflation, says John Silvia, CEO of Dynamic Economic Strategy. “Market participants are learning to play the ball, not the referee,” Warsh observed this week.

The implications of this situation are profound. With interest rates rising and borrowing costs outpacing wages, it’s clear that Trump’s economic policies have failed to deliver on their promises. The administration’s attempt to spin a positive narrative around the economy is starting to unravel, and Republicans face an uphill battle ahead of the midterm elections.

As voters consider which party to back in November, they should remember that the current economic landscape is not what Trump promised. In fact, it’s the opposite: instead of “rocket fuel” for growth, we’re seeing a sluggish 1.5% annual growth rate and rising debt service costs. The question now is whether Trump will own up to his failed promises or continue to peddle misinformation to voters.

The stakes are high, but one thing is clear: the economy under Trump has not delivered on its promises. It’s time for a reckoning – and perhaps, just perhaps, it’s already too late for the incumbent president to change course.