Inflation continues to be public enemy number 1 in today’s US economy. Americans are fed up with the high cost of living and former President Donald Trump says he will help.
However, 16 Nobel Prize-winning economists warn that Trump’s proposals would not only fail to correct inflation but would also make the situation worse.
“We, the undersigned, are deeply concerned about the risks of a second Trump administration to the US economy,” the economists wrote in a letter published Tuesday, which was first reported by Axios.
The letter, organized by famed economist Joseph Stiglitz, argued that there are valid reasons to fear that Trump’s agenda could “rekindle” inflation.
In particular, economists point to Trump’s “fiscally irresponsible budgets” and to nonpartisan research from firms such as the Peterson Institute, Oxford Economics and Allianz that conclude that Trump’s agenda – if successfully enacted – would increase inflation.
Trump approved $8.4 trillion in new 10-year loans during his term — nearly double what President Joe Biden has so far in office, according to the Committee for a Responsible Federal Budget.
Not only does Trump want to extend his 2017 tax cuts — a move the Congressional Budget Office warns would cost nearly $5 billion — but the former president recently told CEOs during a closed-door meeting that he would like to reduce the corporate tax rate further.
However, cutting taxes would pose the risk of speeding up an economy at a time when the US Federal Reserve is working hard to slow the economy and combat inflation.
“The outcome of these elections will have economic repercussions for years, and possibly decades,” the economists wrote in the letter. “We believe that a second Trump term would have a negative impact on the US economic position in the world and a destabilizing effect on the US domestic economy.”
The Stiglitz-led letter did not directly mention Trump’s trade and immigration policies, but some mainstream economists warn they would also be inflationary.
Trump called for increased tariffs on China and all other trading partners – a move that Moody’s Analytics predicted would kill jobs and worsen inflation. Trump argues that tariffs would save jobs and punish China for trade practices both parties are fed up with.
Biden has kept the vast majority of Trump-era tariffs in place and recently lifted some tariffs on China, albeit in a more targeted manner.
Some economists are also concerned that Trump’s plans to launch an immigration crackdown and unprecedented deportations will overheat the labor market and increase consumer prices.
In the letter, the 16 Nobel economists expressed concern about the rule of law and stability if Trump wins the White House again.
“Among the most important determinants of economic success are the rule of law and economic and political certainty,” the letter states. “Donald Trump and the vagaries of his actions and policies threaten this stability and America’s standing in the world.”
In addition to Stiglitz, the letter was signed by Robert Shiller, who became famous for predicting the housing bubble of the mid-2000s, by the former chief economist of the World Bank, Paul Romer, and by George Akerlof, husband of the secretary of the US Treasury, Janet Yellen.
In contrast, economists praised Biden’s work on the economy, arguing that his major investments in infrastructure, manufacturing and climate will reduce long-term inflationary pressure and facilitate the transition to clean energy.
“While each of us has different opinions about the specifics of various economic policies,” the economists wrote in the letter, “we all agree that Joe Biden’s economic agenda is far superior to Donald Trump’s.”
In response, the Trump campaign criticized economists and blamed Biden for high inflation.
“The American people do not need useless, disinterested Nobel Prize winners to tell them which president put the most money in their pockets,” Karoline Leavitt, national press secretary for the Trump campaign, said in a statement. to CNN. “Americans know we cannot afford four more years of Joe Biden’s economy, and when President Trump returns to the White House, he will reimplement his pro-growth, pro-energy, pro-jobs agenda to lower the cost of living and raise all Americans.”
It’s true that economists don’t have a crystal ball, not even Nobel Prize winners.
And voters give Trump higher marks on the economy.
As Harry Enten reported, from CNNthe average poll gives Trump an 18-point lead over Biden on inflation and 13 points on the economy.
In an ABC News/Ipsos poll conducted in May, more than 80% of respondents said the economy and inflation were important in determining their vote – and on both issues. Trump had a 14-point lead over Biden.
Voters made clear their concerns about Biden regarding the economy. Just 34% of Americans approved of Biden’s economic policies in a poll CNN at the end of April and even fewer (29%) approve of Biden when it comes to inflation.
And yet, some experts are concerned about what Trump’s policies would mean for the economy.
Last week, Moody’s Analytics warned that if Republicans come to power in November, a toxic mix of higher customs tariffs, fewer immigrants and stimulus fueled by tax cuts would cause inflation to reaccelerate and unemployment to rise above 5%. and the US economy stumbled into a recession.
In contrast, Moody’s concluded that if Biden wins and there is a divided Congress, the Federal Reserve will begin cutting interest rates, inflation will return to normal and the US economy will avoid a recession.
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