Trump’s Plan to Supercharge Inflation

MAGA world and even may other non-cultists cling to the myth that America's economy would be better under a second Trump regime.   In doing so, they focus on Trump proposals that play to their racism - e.g.,  mass deportations of non-whites and tariffs on foreign goods - but utterly ignore the overall impact these proposals for second Trump regime would have on inflation.  Indeed, they are akin to those in Great Britain who continue to support Brexit even as the results of Brexit have hammered the British economy and lead to higher prices and a lowering standard of living.   Just because something plays to one's hatreds does not mean it would be good economic policy.  A piece in The Atlantis looks at how Trump's proposals would supercharge inflation and harm everyday working Americans. The big issue becomes how do the Biden administration and the media wake voters (save for the ultra-wealthy who would receive tax cuts) up to how a second Trump term would be against their own economic interest.  Punishing brown skinned migrants might thrill the MAGA base, but would have an adverse impact on consumer prices and employers in need of labor.   A piece at The Atlantic looks at Trump 2.0 proposals:

Among prominent economists, no one was more explicit than former Treasury Secretary Larry Summers in warning that President Joe Biden and the Federal Reserve Board risked igniting inflation by overstimulating the economy in 2021. Soaring prices over the next few years proved Summers correct.

Now Summers sees the risk of another price shock in the economic plans of former President Donald Trump. “There has never been a presidential platform so self-evidently inflationary as the one put forward by President Trump,” Summers told me in an interview this week. “I have little doubt that with the Trump program, we will see a substantial acceleration in inflation, unless somehow we get a major recession first.”

Trump’s greatest asset in the 2024 campaign may be the widespread belief among voters that the cost of living was more affordable when he was president and would be so again if he’s reelected to a second term. But a growing number of economists and policy analysts are warning that Trump’s second-term agenda of sweeping tariffs, mass deportation of undocumented migrants, and enormous tax cuts would accelerate, rather than alleviate, inflation.

Mark Zandi, the chief economist for Moody’s Analytics, forecasts that compared with current policies, Trump’s economic plans would increase the inflation rate and force the Federal Reserve Board to raise interest rates higher than they would be otherwise. “If he got what he wanted,” Zandi told me, “you add it all up and it feels highly inflationary to me.”

In a study released last month, the nonpartisan Peterson Institute for International Economics calculated that the tariffs Trump says he will impose on imports would dramatically raise costs for consumers. “Trump is promising a no-holds-barred, all-out protectionist spree that will affect every single thing that people buy that is either an import or in competition with imports,” Kimberly Clausing, a co-author of the study and a professor of tax policy at the UCLA Law School, told me. . . . Trump’s economic plan “doesn’t bode well” for “the cost of living,” as he told me.

Summers told me he remains unsure that the policies Biden and the Fed are pursuing will push inflation all the way down to the Fed’s 2 percent target. But he said he is confident that Trump’s blueprint would make inflation worse.

Summers identified multiple pillars of Trump’s economic agenda that could accelerate inflation. These included compromising the independence of the Federal Reserve Board, enlarging the federal budget deficit by extending his 2017 tax cuts, raising tariffs, rescinding Biden policies designed to promote competition and reduce “junk fees,” and squeezing the labor supply by restricting new immigration and deporting undocumented migrants already here. Others note that top Trump advisers have also hinted that in a second term, he would seek to devalue the dollar, which would boost exports but further raise the cost of imported goods.

For many economists, Trump’s plans to impose 10 percent tariffs on imported products from all countries and 60 percent tariffs on imports from China are the most concerning entries on that list.

These new levies go far beyond any of the tariffs Trump raised while in office, . . . . Trump proposes to raise tariffs on $3.1 trillion in imported goods, more than 150 times as much. Trump “has been quite clear that he is envisioning something quite a bit larger than he did last time,” Clausing told me.

Trump’s tariffs would raise prices for consumers on the goods they purchase by at least $500 billion a year, or about $1,700 annually for a middle-income family. The cost for consumers, she told me, could be about twice as high if domestic manufacturers increase their own prices on the goods that compete with imports.

“When you make foreign wine more expensive, domestic manufacturers can sell their wine at a higher price,” Clausing told me. “The same with washing machines and solar panels and chairs. Anything that is in competition with an import will also get more expensive.”

While Trump’s proposed tariffs would increase the cost of goods, his pledge to undertake a mass deportation of undocumented migrants would put pressure on the cost of both goods and services.

Undocumented migrants are central to the workforce in an array of service industries, such as hospitality, child care, and elder care. But they also fill many jobs in construction, agricultural harvesting, and food production. Removing millions of undocumented workers from the economy at once “would create massive labor shortages in lots of different industries,” . . . . “If you are talking about kicking 50 percent of the farm labor force out, that is not going to do wonders for agricultural food prices,” David Bier, director of immigration-policy studies at the libertarian Cato Institute, told me.

[I]mmigrants and their children already account for almost all the growth in the population of working-age adults ages 18 to 64. If Trump in fact extracts millions of undocumented migrants from the workforce, “there is no replacement [available] even at a theoretical level,” Bier said.

More difficult to quantify but potentially equally significant are the frequent indications from Trump that, as with all other federal agencies, he wants to tighten his personal control over the Federal Reserve Board. . . . . for instance, by seeking to fire or demote the board’s chair, Jay Powell—would be aimed at pressuring the board into prematurely cutting interest rates

Inflation, Zandi projects, would be nearly a full percentage point higher (0.8 percent, to be exact) under the scenario of Trump and Republicans in control than in the alternative of Biden presiding over a divided government. Inflation would be about that much higher under Trump even compared with the less likely scenario of Democrats winning the White House and both congressional chambers, Zandi projects.

Zandi said the only reason he does not anticipate prices rising even faster under Trump is that the Federal Reserve Board would inevitably raise interest rates to offset the inflationary impact of Trump’s proposals.

But those higher interest rates would come with their own cost: Zandi projects they would depress the growth in total economic output and personal income below current policy, and raise the unemployment rate over the next few years by as much as a full percentage point—even as inflation rises. Raising the specter of the slow-growth, high-inflation pattern that hobbled the American economy through much of the 1970s, Zandi told me, “It is really a stagflation scenario.”

People need to wake up to what Trump proposes and the economic costs.  And this warning does not factor in any of the social chaos Trump 2.0 would bring as the right wing extremists go after contraception, gays, and non-whites and non-Christians.