The Opinions - ‘People Are In for a Really Rude Shock’ on Trump’s Economy

Episode Date: November 12, 2024

Voters chose Donald Trump, in part, in response to inflation under President Biden. And yet, the columnist Paul Krugman argues, the new president-elect’s economic plan “is the most inflationary program probably that any American president has ever tried to implement.” In this episode, Krugman outlines four reasons Trump’s economic plans will hurt Americans’ wallets.Thoughts? Email us at [e-mail]. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

This is The Opinions, a show that brings you a mix of voices from New York Times opinion. You've heard the news. Here's what to make of it. I'm Paul Krugman. I'm an opinion writer for The New York Times and an economist on the side. With Trump going back to the White House, as a citizen, I'm terrified. Very much so. This is a guy with authoritarian impulses and it looks like very few guardrails. So God knows what America will look like in a couple of times. years. As an economist, there's a great irony here, which is that the biggest single factor in Trump's victory was the fact that there was a burst of inflation. It's in the rearview mirror

now, but people are still annoyed at how much things cost. And yet, Trump's economic program, as far as we can tell, is the most inflationary program probably that any American president has ever tried to implement. So people voted against what they're probably, actually going to get? There are a few big reasons why Trump's plan looks seriously inflationary. One is he is going to explode the deficit. He's got all of these tax cut promises. They are massive tax cuts, biggest ever. Completely unfunded fantasies about raising the money through tariffs or massive spending cuts, which are not going to happen. And when you have an economy that's already running pretty hot, deficits are inflationary. Second thing, tariffs. To me,

the most beautiful word in the dictionary is tariff. A tariff is a tax on imports. It's a sales tax. Much as Trump insists that foreigners will pay it, that's not how it works. Third thing is crack down on undocumented immigrants. We will begin, and we have no choice, the largest deportation operation in American history. Which will probably end up catching a lot of people who are legally here anyway. So that's an important part of our workforce.

and particularly heavily in the agricultural sector, actually also the food processing center. The food on your table is largely put there by immigrants, many of whom will end up being deported. What's going to happen is that farm owners are going to have to pay much, much higher wages to get people to do those jobs, which farmers will have to pass on in the form of higher prices.

And then secondarily, people are upset about housing costs and rent, and the answer to that is build more houses. Who builds houses? The answer is a large part of the construction force is foreign-born, too. So those are the two places where you're really going to see a major impact if Trump actually goes through with his plans to round up undocumented immigrants. And finally, there's what he wants to do with the Federal Reserve. I made a lot of money. I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman. an independent, quasi-independent agency that sets interest rates that controls monetary policy.

That's not in the Constitution. It's not even something that we always had in the United States, but that's the solution that most advanced countries have come around to as the best way of achieving stability. And most U.S. presidents in the modern era have been extremely cautious about respecting the independence of the Fed. We've decided to outsource this piece of policy. to technocrats. Trump, even during his first term, broke with that tradition.

He lectured the Fed, saying, I want you to cut rates. He even said, I want rates to go negative. It didn't have much effect first time around. But if we have the situation that I believe we're going to have, where inflation has taken off

because of Trump's policies, and the Federal Reserve following its normal procedure, wants to start hiking interest rates to put a lid on that inflation, very, very likely that Trump will go through the roof. He'll say, how dare you, I have found this guy who tells me you should be cutting interest rates instead of raising him. And again, the Fed's independence is not set in stone. So I would consider it very likely that the Fed will not react as it normally would to put a lid on the inflation that tariffs

and deportations are causing. If there's one thing that we've learned from watching Trump, it's that he dismisses facts he doesn't like. He tells us that we have rampant crime when, in fact, murder is plunging. He says that all the jobs are going to immigrants, which is not true. And so I have very little reason to believe that Trump will acknowledge that his policies are actually producing inflation, much more likely that he'll start putting pressure on government,

statistical agencies to report better numbers. That is what autocratic regimes have done around the world in the past. So it's quite unlikely that he will actually reverse course, either on the tariffs or on the deportations. What should listeners take from this? First of all, I would say you should probably be aware that some things, especially, I think food is about to get substantially more expensive. It's funny because the big run-up in prices that we had under Biden was,

actually nobody's fault. It was consequences of the pandemic disruption and to a limited extent the war in Ukraine. And it happened everywhere. There's almost an eerie similarity in the track of inflation across major economies. This time, if we have the inflation that I think is coming, it will be somebody's fault. It will be Trump's policies that do it. There will be a lot of buyer's remorse, a big backlash from the voting public. Now, how that actually tracks, translates and what the next election looks like is a whole other question. But I do think that people are in for a really rude shock and they will be very upset. If you like this show, follow it on Spotify, Apple, or wherever you get your podcasts. This show is produced by Derek Arthur,

Sophia Alvarez Boyd, Vichaka, Fiby Lett, Christina Samuoski, and Jillian Weinberger. It's edited by Kari Pitkin, Alison Brusek, and Annie Rose Strasser. Engineering, Mixing and original music by Isaac Jones, Sonia Herrero, Pat McCusker, Carol Saburo, and Afim Shapiro. Additional music by Amin Sahota. The fact check team is Kate Sinclair, Mary Marge Locker, and Michelle Harris. Audience Strategy by Shannon Busta, Christina Samuelski, and Adrian Rivera. The executive producer of Times Opinion Audio is Annie Rose Dresser.