At a May 1 rally in Waukesha, Wis., Donald Trump said that when he was president “we had no inflation,” and that now “we have record horrible inflation” that is “getting worse.” All three of those claims are, of course, incorrect. Trump also described inflation as “a country buster” that destroyed Germany, presumably referring to the hyperinflation of 1923, which was the year of Adolf Hitler’s failed beer-hall putsch.
Even for Trump, who loves to work up a crowd, that’s too far.
President Biden does have an inflation problem, but it’s not a Weimar Germany kind of problem. Economists expect that when the Bureau of Labor Statistics reports the Consumer Price Index for April next week, the annual change will come in around 3.4 percent. Contrast that with Germany in 1923, when people paid for goods with wheelbarrows of cash and burned bank notes to keep themselves warm. To compare the United States’ modestly-above-target inflation with Germany’s hyperinflation is inflated hype.
I won’t get into why Americans are so upset about inflation that they might choose Trump over Biden in November. Many commentators, including me and my Opinion colleagues Binyamin Appelbaum and Paul Krugman, have taken shots at that question.
I want to look at a different question, which is whether inflation would be lower if Trump won. Or, as I suspect, higher.
When I wrote about the economic outlooks under a second Biden term and another Trump term, one clear message I heard from economists was that many of Trump’s priorities could reignite inflation. The most obvious is his threat to raise tariffs on almost all imports, and raise them more on imports from China. The cost of those tariffs would be borne in part by the exporting nations, but even more by American consumers and industry. “I think we should have a ring around the collar” of the U.S. economy, Trump told Fox Business last year, apparently mixing up old laundry detergent commercials with the mercantilist metaphor of a protective ring of defense around domestic industry.
Trump also wants to extend all of the tax cuts in the 2017 Tax Cuts and Jobs Act, many of which are scheduled to expire at the end of 2025, which would keep budget deficits high. That would be inflationary, although only moderately so, because those cuts are already in place and most of the continued dollar savings would go to upper-income households, which have a lower propensity to consume out of each dollar saved.
Deporting undocumented immigrants — he has promised “the largest domestic deportation operation in American history” — is a big applause line for Trump on the campaign circuit. But that would push up labor costs, also stoking inflation.
One other way Trump could fuel inflation would be by pressuring the Federal Reserve to go along with lowering interest rates to juice economic growth. That’s something he repeatedly sought from Federal Reserve Chair Jerome Powell during his presidency. But Powell has made it clear that he doesn’t take orders from the White House. His term as chair ends on May 15, 2026.
If the next president doesn’t reappoint Powell as chair, he has the option to finish out his term as governor, which ends in January 2028, although he might choose retirement. One other seat comes up for grabs in January 2026, and there could be other openings on the seven-member board in the coming four years if other governors choose not to serve out their terms.
To summarize, there was not zero inflation when Trump was president. It is not at a record high now. It is not rising. It is not making the United States go bust. And Trump’s policies would most likely not help the situation. If this were just hot air on the campaign trail, we might be able to ignore it. But Trump has a track record of doing some pretty crazy things. If he is re-elected, letting prices inflate once again might well be one of them.
The Readers Write
You wrote about mortgage portability. There is a device for “moving” a mortgage to secure a different piece of property and it is commonly used, albeit for a different reason/form, in commercial transactions. Collateral (mortgage) “spreader agreements” are often used to encumber new property to secure an existing or “old” debt. There are already procedures in place (in my opinion) that could allow for this in securitized trusts. In practice, this is no more complicated than to qualify the new property, issue a new or amended title policy and “close the deal.”
The fact that the residential mortgage industry doesn’t want this is completely addressed in your article. They simply do not see an incentive to work that hard.
James Michael Costello
Cape Coral, Fla.
I appreciated your discussion of what might happen if the perceived risk of investing in the United States increases. I summarize related studies from a broad set of countries in this report on the financial and economic dangers of democratic backsliding. Three themes emerge: First, weak rule of law reduces investment. Second, political uncertainty often disrupts asset markets. Third, political actors who seek to undermine democratic practices also often have a populist, anti-globalization orientation.
The United States is not immune from political risk. And it is difficult for investors to diversify away from risks that emanate from the center of the global financial system.
Layna Mosley
Princeton, N.J.
The writer is a professor of politics and international affairs at Princeton.
Concerning your newsletter on risks of the United States:
The dollar may be shaky.
The yen is slowing down.
The euro ain’t heroic.
The ruble is a clown.
The only currency not bum
I think is gold-pressed latinum.
Tim Torkildson
Provo, Utah
Quote of the Day
“And as I was saving these little sums I soon learned that I could get as much interest for 50 dollars loaned at 7 percent — the legal rate in the state of New York at that time for a year — as I could earn by digging potatoes for 100 days. The impression was gaining ground with me that it was a good thing to let the money be my slave and not make myself a slave to money.”
— John D. Rockefeller, quoted by Ida Tarbell in “The History of the Standard Oil Company” (1904)
