The Consumer Price Index fell 0.1% from May to June of 2024. This is the first time this has happened since the early Pandemic in early May 2020.
As it stands, inflation seems to be cooling down and, given time, might get back to pre-pandemic levels or better.
It would seem that making a course correction at this point is unnecessary and might even be harmful to the economy.
Well, 16 Nobel prize-winning economists agree and have given a stark warning on how a Trump presidency could undo the economic recovery seen under President Biden. Trump’s economic plan would give tax cuts to corporations, place tariffs on Chinese goods, and much more, exacerbating inflation to the same extent, if not more, than his first presidency did.
The Current State of the Economy
Under President Biden, the US economy has seen decent growth, a better-than-expected jobs growth report, but has also seen high interest rates. When interests rates are high, corporations watch their expenses and are risk averse, hence the marathon interviews and reports of salaries being driven down. This has the average person in America feel like the economy is worse off than it is.
About 68% of voters say the economy isn’t doing so well, while the remaining 32% say that it’s good or excellent.
What the Economists Have to Say
The letter that was signed by 16 Nobel Prize-winning economists is short — only a page.
It doesn’t mince words when it says that the economy under President Biden has seen a strong recovery in the labor markets. The letter continues to state that investments by the Biden administration in climate, manufacturing, and infrastructure are key reasons why President Biden’s economic plan is good for the economy.
The Economists’ Warning
The warning issued by these economists is that Trump’s economic plan which includes tariffs, corporate tax cuts, and duties will cause inflation to go right back up.
The letter names nonpartisan researchers at Evercore, Allianz, Oxford Economics, and the Peterson Institute as all agreeing that Trump’s policies will increase inflation.
What’s in President Biden and Former President Trump’s Economic Plans?
Trump’s economic plan include the following.
- 10% increase on duties for imports
- 60% tariffs on Chinese goods
- An exception on tipped wages for hospitality employees
- Strict immigration policies
The Trump campaign believes that tariffs will replace the revenue lost due to the hefty corporate tax cuts he implemented in his first term, and plans on extending and deepening in his second.
Here’s how President Biden’s economic plan compares.
- A tax credit for one year of $10,000 for families that sell their starter homes
- Policies that will target “shrinkflation,” drug costs, and high gas prices
- A cap on rent increases
- An increase in the Corporate Tax rate to 28%
The White House claims President Biden’s economic plan would generate $270 billion in 10 years.
The Bottom Line
When 16 Nobel Prize-winning economists issue a warning, it’s probably for a good reason. Their logic is that Trump’s tariffs and corporate tax cuts would lead to an increase in U.S. inflation and by extension, damage the global economy.
President Biden’s economic plan seeks to provide relief to the middle class by lowering costs and increasing taxes on corporations and high-income earners. While this seems like a clear case for voters, it’s not that simple.
Even though the U.S. economy has experienced strong growth and a rapid recovery since the pandemic, it’s not felt by the average person—yet. Tightening the belt is never something that makes people more comfortable, and Biden has held steadfast in the belt tightening for essentially his entire presidency. The rewards of these uncomfortable policies will only bear fruit if they are given the time required to come to fruition.
Can a strongly written letter by 16 Nobel Prize-winning economists change their minds?
Only time will tell.
