For the past few years, over and over, voters have told pollsters and pundits that they’re hopping mad about inflation. Well, we just elected a president who, if he follows through on two of his central campaign promises — across-the-board tariffs and mass deportation of undocumented immigrants — will probably cause soaring inflation.
How will voters react?
I’ve written about the likely inflationary impact of Donald Trump’s policies. All of that still stands. But there’s an issue that I haven’t stressed as much as I probably should have: the specific effects of his proposed deportations on grocery and housing prices, both of which have been political flashpoints.
First, a word about deficits to set the stage: The nonpartisan Committee for a Responsible Federal Budget estimates that Trump’s tax plans would add almost $8 trillion to the debt over the next decade.
Trump has claimed that he can make up for tax cuts with revenue from tariffs and huge cuts in government spending, but those claims are wildly unrealistic.
Deficits — contrary to what you sometimes hear — don’t always cause inflation. After the 2008 financial crisis, warnings about deficit-driven inflation proved wrong because (as basic economics predicted) deficits aren’t inflationary in a depressed economy. Even President Biden’s big spending in 2021 took place in an economy with depressed employment, and the inflationary impact was further mitigated by a surge in immigration, which expanded the labor force and helped create the capacity to meet higher demand.
However, with the economy starting from, essentially, full employment in his second term, Trump, with mass deportations, would degrade productive capacity, balloon deficits and — yes — bring inflation roaring back, keeping a grim pledge on punitive immigration policy while breaking one on providing relief to American consumers.
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