It’s been perhaps a generation and a half since America experienced the pain of double-digit inflation. We don’t talk much about inflation these days, because it isn’t happening except in the most minuscule measurements. For years we were told by Republicans that profligate spending by Democrats would put the United States further and further into debt which would mean runaway inflation.
The mantra about preventing inflation has been to raise sufficient revenue to cover budget expenses but to also restrain spending. So what is it that President-elect Donald Trump wants to do?
First, he wants to drastically reduce taxes. Republicans love to point out how fifty-five years ago President John F. Kennedy advocated a slight reduction in taxes in order to put more money in circulation and thus further stimulate the economy. It worked for Kennedy because his tax cuts were minimal. But now Trump wants to drastically reduce taxes on both corporations and on individuals.
There may be merits for reducing corporate taxes, particularly if they bring large sums of monies such as Apple’s $200 billion back to the US from Ireland and other tax havens. But with all business taxes being reduced, it means that the initial impact will be reduced tax revenues for the U.S. government. That leads to more federal borrowing and the likelihood of increased inflation.
On the spending side, Trump wants to create a new economic stimulus through infrastructure construction. This is something that Barack Obama has been trying to do all through his presidency, but except for one moderate jump-start in 2009 following the economic collapse of the final Bush years, Republicans have blocked all attempts by Obama. Why? The most likely reason is because he is Barack Obama and he is a Democrat. But if Donald Trump proposes it to Congress, it will likely pass. This is one of those times when Democrats can be statespersons and support good legislation even though it emanates from a Republican (who borrowed it from a Democrat). The stimulus will likely put people to work and if the projects are not boondoggles, it will improve the condition of our country.
But the final leg of the tripod from Trump will be increased military spending. This is something that Republicans can really glom onto. It’s likely that there will be little consideration to what projects might actually increase American security. Trump and other Republicans think that just the idea of spending more for the military will actually make America safer. In other words, we’re supposed to think that if we spend hundreds of billions of dollars for problematic projects, we will all feel better.
One thing about inflation is that it is class-blind. Unlike unemployment, it equally impacts people of all economic strata. So a word of caution to the Republicans in all branches of government: if you really want to piss off the widest swath of the American public, follow the plan of reducing taxes for the wealthy while dramatically increasing spending, particularly for projects that have minimal marginal return. Higher prices for milk affects some people; not others. Higher prices for luxury cars affects some; not others. Higher prices for rent or home ownership affects virtually everyone.
Democrats will not be able to do much to prevent Republicans for paving the road of inflation. The only way the Republicans might prevent it is by drastically reducing social safety net spending. Trump won the election by capturing the votes of those who are forty-five years of age and older. He should see how much they would like having their Social Security and Medicare gored.
So unless Trump does enough unthinkable things between now and December 19 when the Electoral College “meets,” he will become president. You may need to brace yourself for a ride on the Trumpian Inflation Superhighway.