A group of Nobel prize-winning economists is sounding alarm bells that former President Donald Trump’s economic policies will reignite inflation should he secure a second term in the White House. The irony is that these are the same chorus of professionals who failed to forecast inflation in 2021, with some shrugging off the legitimate concern as hogwash, pish-posh, and fiddlesticks. How could they have missed it? Perhaps they just can’t afford to see it. Nearly all of them have a history of political donations to Democrats in general and Joe Biden specifically, and the man whose signature appears first on both documents, George Akerlof, is husband to Janet Yellen, Biden’s secretary of the Treasury.
Trumponomics Will Relight Inflation Flame?
In a letter sent to the ether, 16 Nobel-winning economists warned that the presumptive Republican presidential nominee could relight the flame of inflation and devastate the global economy. They stopped short of explaining how Trump’s policies would do this, vaguely alluding to “fiscally irresponsible budgets” as if Bidenomics has been a model of fiscal discipline.
So far, the GOP challenger has proposed an across-the-board 10% tariff and tax cuts for all income levels. Data show that Trump’s tariffs did very little to spur price inflation, while a reduction in tax rates might ignite growth prospects that could generate more federal revenues (think the Laffer Curve).
Instead of highlighting what they fear, these prestigious economists asserted that President Joe Biden’s “economic agenda is vastly superior to Donald Trump.” In his first three years in the White House, they say, President Biden signed major climate investments that will boost economic growth, increase productivity, and lower long-term inflationary pressures. Another four years of a Biden administration “would allow him to continue supporting an inclusive U.S. economic recovery.”
“We believe that a second Trump term would have a negative impact on the U.S.’s economic standing in the world, and a destabilizing effect on the U.S.’s domestic economy,” they wrote. “Many Americans are concerned about inflation, which has come down remarkably fast. There is rightly a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets.”
Despite Biden claiming on a couple of occasions that inflation was 9% when he arrived at the White House, the consumer price index was 1.4% when Biden moved into 1600 Pennsylvania Ave. In fact, it topped out at 2.9% in June 2018 and averaged at 2.5%. Since January 2021, cumulative inflation has been 20%, with a wide range of goods and services soaring.
Will inflation climb under Trump? The Federal Reserve, the Congressional Budget Office, and Wall Street believe the 2% target will be restored. However, runaway federal spending, ballooning budget deficits, and a soaring national debt could result in the CPI following the same path as what occurred in the 1970s and 1980s.
Irony Alert
The letter was spearheaded by Joseph Stiglitz, who won a Nobel prize in 2001. Why does this name matter? In February 2021, Stiglitz penned a piece titled “Biden Goes Big,” suggesting that inflation was nothing to be concerned about. He opined:
“Opponents of the Biden plan also disingenuously warn against inflation – that lurking bogeyman that is more fantasy than real threat nowadays. Indeed, some data suggest that wages may be falling in parts of the economy. But if inflation does emerge, the US has ample monetary and fiscal tools at the ready.”
Meanwhile, of the 16 signatories, 13 of these economists signed a September 2021 letter purporting that the president’s Build Back Better agenda would “ease longer-term inflationary pressures.” They contended that inflation fears were “short-sighted,” and if price pressures did come to fruition, “the inflationary impacts will be at most negligible.” In addition, Edmund Phelps told CGTN Global Business three years ago that he was not worried about US stimulus causing inflation.
It is surprising Paul Krugman did not sign his name to the letter. It would have been the coup de grace since he was more vocal than others that the inflation bomb would not explode.
What Inflation?
As Liberty Nation News recently noted, very few mainstream economists and market watchers had anticipated an inflation tsunami following the Fed’s $6 trillion injection and the passage of the CARES Act and the American Rescue Plan. What makes this more comical is that the current administration insists that when Biden claims inflation was high when he was sworn in, he meant all of the factors were already in place for the CPI to surge to 9.1%. However, every single White House official dismissed, misled, and scoffed at inflation concerns throughout 2021. From Janet Yellen’s “transitory” comments to Jen Psaki’s “tragedy of the treadmill” remarks, Washington got it entirely wrong on this tax.
