Connect with us

Published

on

Sign up for The Decision, a newsletter featuring our 2024 election coverage.

Among prominent economists, no one was more explicit than former Treasury Secretary Larry Summers in warning that President Joe Biden and the Federal Reserve Board risked igniting inflation by overstimulating the economy in 2021. Soaring prices over the next few years proved Summers correct.

Now Summers sees the risk of another price shock in the economic plans of former President Donald Trump. There has never been a presidential platform so self-evidently inflationary as the one put forward by President Trump, Summers told me in an interview this week. I have little doubt that with the Trump program, we will see a substantial acceleration in inflation, unless somehow we get a major recession first.

Summers is far from alone in raising that alarm. Trumps greatest asset in the 2024 campaign may be the widespread belief among voters that the cost of living was more affordable when he was president and would be so again if hes reelected to a second term. But a growing number of economists and policy analysts are warning that Trumps second-term agenda of sweeping tariffs, mass deportation of undocumented migrants, and enormous tax cuts would accelerate, rather than alleviate, inflation.

Rog Karma: The great normalization

In an upcoming analysis shared exclusively with The Atlantic, Mark Zandi, the chief economist for Moodys Analytics, forecasts that compared with current policies, Trumps economic plans would increase the inflation rate and force the Federal Reserve Board to raise interest rates higher than they would be otherwise. If he got what he wanted, Zandi told me, you add it all up and it feels highly inflationary to me.

In a study released last month, the nonpartisan Peterson Institute for International Economics calculated that the tariffs Trump says he will impose on imports would dramatically raise costs for consumers. Trump is promising a no-holds-barred, all-out protectionist spree that will affect every single thing that people buy that is either an import or in competition with imports, Kimberly Clausing, a co-author of the study and a professor of tax policy at the UCLA Law School, told me.

Douglas Holtz-Eakin, president of the center-right American Action Forum and a former director of the Congressional Budget Office, is sympathetic to many elements of Trumps agenda and critical of Bidens. But Holtz-Eakin agrees that Trumps economic plan doesnt bode well for the cost of living, as he told me.

Summers, who served as Treasury secretary for Bill Clinton and the top White House economic adviser for Barack Obama, took substantial flak from fellow Democrats when he repeatedly warned that Biden was risking high inflation by pushing through Congress another massive COVID-relief package in 2021, while the Federal Reserve Board was still maintaining interest rates at historically low levels. The Biden administration and the Fed both did make consequential errors of failing to do macroeconomic arithmetic for which the economy is still paying, he told me.

Summers told me he remains unsure that the policies Biden and the Fed are pursuing will push inflation all the way down to the Feds 2 percent target. But he said he is confident that Trumps blueprint would make inflation worse.

Summers identified multiple pillars of Trumps economic agenda that could accelerate inflation. These included compromising the independence of the Federal Reserve Board, enlarging the federal budget deficit by extending his 2017 tax cuts, raising tariffs, rescinding Biden policies designed to promote competition and reduce junk fees, and squeezing the labor supply by restricting new immigration and deporting undocumented migrants already here. Others note that top Trump advisers have also hinted that in a second term, he would seek to devalue the dollar, which would boost exports but further raise the cost of imported goods.

For many economists, Trumps plans to impose 10 percent tariffs on imported products from all countries and 60 percent tariffs on imports from China are the most concerning entries on that list.

These new levies go far beyond any of the tariffs Trump raised while in office, several of which Biden maintained, said Clausing, who served as the Treasury Departments deputy assistant secretary for tax analysis for Bidens first two years. Trumps proposed tariffs also dwarf the levies Biden recently imposed on electric vehicles and assorted other products from China: Bidens new measures affect about $18 billion in Chinese imports, she said, whereas Trump proposes to raise tariffs on $3.1 trillion in imported goods, more than 150 times as much. Trump has been quite clear that he is envisioning something quite a bit larger than he did last time, Clausing told me.

In the Peterson study, Clausing and her co-author, Mary Lovely, calculated that Trumps tariffs would raise prices for consumers on the goods they purchase by at least $500 billion a year, or about $1,700 annually for a middle-income family. The cost for consumers, she told me, could be about twice as high if domestic manufacturers increase their own prices on the goods that compete with imports.

When you make foreign wine more expensive, domestic manufacturers can sell their wine at a higher price, Clausing told me. The same with washing machines and solar panels and chairs. Anything that is in competition with an import will also get more expensive.

While Trumps proposed tariffs would increase the cost of goods, his pledge to undertake a mass deportation of undocumented migrants would put pressure on the cost of both goods and services. Undocumented migrants are central to the workforce in an array of service industries, such as hospitality, child care, and elder care. But they also fill many jobs in construction, agricultural harvesting, and food production. Removing millions of undocumented workers from the economy at once would create massive labor shortages in lots of different industries, Zandi told me. That would force employers to either raise wages to find replacements or, more likely, disrupt production and distribution; both options would raise the prices consumers pay. If you are talking about kicking 50 percent of the farm labor force out, that is not going to do wonders for agricultural food prices, David Bier, director of immigration-policy studies at the libertarian Cato Institute, told me.

Removing so many workers simultaneously would be disruptive under any circumstances, many economists agree. But it could be especially tumultuous for the U.S. now because the native-born population has grown so slowly in recent years. Bier pointed out that immigrants and their children already account for almost all the growth in the population of working-age adults ages 18 to 64. If Trump in fact extracts millions of undocumented migrants from the workforce, there is no replacement [available] even at a theoretical level, Bier said.

More difficult to quantify but potentially equally significant are the frequent indications from Trump that, as with all other federal agencies, he wants to tighten his personal control over the Federal Reserve Board. During his first term, Trump complained that the Fed was slowing economic growth by keeping interest rates too high, and any second-term move to erode the Feds independencefor instance, by seeking to fire or demote the boards chair, Jay Powellwould be aimed at pressuring the board into prematurely cutting interest rates, predicts Alan Blinder, a former Fed vice chair who is advising Bidens reelection campaign. That would become another source of inflationary pressure, he says, likely spooking financial markets.

In the upcoming Moodys analysis, Zandi estimates the cumulative impact of all these possible changes. He compares a scenario in which Trump can implement his entire agenda with one in which power remains divided between Biden in the White House and Republicans controlling at least one congressional chamber. Inflation, Zandi projects, would be nearly a full pecentage point higher (0.8 percent, to be exact) under the scenario of Trump and Republicans in control than in the alternative of Biden presiding over a divided government. Inflation would be about that much higher under Trump even compared with the less likely scenario of Democrats winning the White House and both congressional chambers, Zandi projects.

Zandi said the only reason he does not anticipate prices rising even faster under Trump is that the Federal Reserve Board would inevitably raise interest rates to offset the inflationary impact of Trumps proposals.

But those higher interest rates would come with their own cost: Zandi projects they would depress the growth in total economic output and personal income below current policy, and raise the unemployment rate over the next few years by as much as a full percentage pointeven as inflation rises. Raising the specter of the slow-growth, high-inflation pattern that hobbled the American economy through much of the 1970s, Zandi told me, It is really a stagflation scenario.

Summers sees the same danger. It is difficult to predict the timing and the precise dynamics, he told me, but it is hard to imagine a policy package more likely to create stagflation than measures that directly raise prices (through tariffs), undermine competition, enlarge deficits, and excessively expand the money supply. There is a real risk during a Trump presidency that we would again see mortgage rates above 10 percent as inflation expectations rose and long-term interest rates increased, he predicted.

Holtz-Eakin, the former CBO director, also worries that Trumps agenda would make it much tougher for the Federal Reserve Board to moderate prices without precipitating a recession. Unlike Zandi and Summers, though, Holtz-Eakin believes that a second-term Biden agenda would also increase upward pressure on prices. Thats partly because of the cost of environmental and other regulations that the administration would impose, but also because he believes a reelected Biden would face enormous pressure to restore new spending programs that the Senate blocked from his Build Back Better agenda in 2021. He also believes that Trumps plans to increase domestic energy production could eventually offset some of the inflationary impact of his other agenda elements.

Kevin Hassett, who served as chair of the Council of Economic Advisers during the Trump administration, has argued that any inflationary impact from Trumps tariff and immigration agenda would be offset by other elements of his planincluding cutting government spending and taxes, increasing energy production, and slashing regulations. Those four effects would dwarf the effects of any other policy proposals, Hassett maintained in an interview with The Washington Post earlier this year.

Holtz-Eakin isnt convinced. He told me that any moderating impact from Trumps energy and deregulatory agenda would take time to develop, while the inflationary effect of his tariffs and deportation plans would be felt immediately. Tariffs happen fast, Holtz-Eakin said. Deportations happen fast.

Rog Karma: What would it take to convince Americans that the economy is fine?

Zandi is even more skeptical. He told me that with domestic oil and gas production already at record levels, Trump has little room to open the spigot even further, or to affect prices much if he does. On regulation, Zandi said he is hard-pressed to see how Trumps plans would translate through to less inflation, at least in a meaningful way.

As with many issues, the potential impact of Trumps second-term plans for inflation has drawn little attention in the presidential race. Instead, the former president so far is benefiting from voters awareness that prices increased much faster under Biden, as the American and global economies emerged from the pandemics disruptions, than they did while Trump was in office.

Apart from concerns about Bidens age, that discontent over inflation appears to be the greatest threat to his reelection. In a recent survey across the seven most closely contested swing states published by the Cook Political Report With Amy Walter, a majority of voters said they considered their cost of living the most important measure of the economys performance. But a daunting three-fifths of voters in the poll, conducted by a bipartisan team of Republican and Democratic pollsters, said inflation is unlikely to be brought under control if Biden is reelected. In contrast, nearly three-fifths of voters said they believed that the cost of living would improve under Trump.

Even though experts such as Summers and Zandi are warning that Trumps economic agenda would have precisely the opposite effect, it wont be easy for Biden to convince voters to weigh those prospective risks more heavily than their retrospective judgments about prices under each mans tenure. But Biden may have no choice but to try. Raising awareness of the inflationary dangers in Trumps agenda may be Bidens best chance of winning a second look from the voters who are now moving toward the former president primarily because they remember gas, groceries, and other necessities costing less while he sat in the Oval Office.

Continue Reading

UK

VE Day: Veterans to join King for tea party as Keir Starmer praises ‘selfless dedication’

Published

on

By

VE Day: Veterans to join King for tea party as Keir Starmer praises 'selfless dedication'

Veterans are set to join the King for a VE Day tea party today as the prime minister has paid tribute to the “selfless dedication” of the war generation.

Among them will be a 99-year-old who took part in the D-Day landings and a 100-year-old woman who worked in the Special Operations Executive, known as Churchill’s Secret Army.

Director general of the Royal British Legion, Mark Atkinson, said the charity was “proud” to be taking a place “at the heart of these national celebrations and commemorations” on the 80th anniversary of the end of the Second World War.

He said it would be “one of our last opportunities as a nation to pay tribute to those veterans still with us today”.

Evacuees from World War Two and veterans who were still in active conflict after VE Day are among the other guests set to attend the tea party, which will take place in the presence of the King and other members of the Royal Family.

The Royal Family will watch a millitary procession and flypast on Monday. File pic: PA
Image:
The Royal Family will watch a military procession and flypast on Monday. File pic: PA

At 12pm, the Royal Family will observe a military procession, followed by a flypast.

It will be the first major VE Day anniversary without any of the royals who stood on the balcony of Buckingham Palace on the day victory in Europe was declared, after the death of the late Queen Elizabeth II in 2022.

More on Ve Day

‘Not just for Britain’

The celebrations come as Prime Minister Sir Keir Starmer praised veterans for their “selfless dedication” and thanked them for a “debt that can never fully be repaid” in an open letter ahead of VE Day.

He said the stories which will be heard this week from those who fought in the Second World War would be a reminder that the victory “was not just for Britain” but was also “a victory for good against the assembled forces of hatred, tyranny and evil”.

Sir Keir said the WW2 veterans “represent the best of who we are” and that without their service “the freedom, peace and joy that these celebrations embody, would not be possible”.

Please use Chrome browser for a more accessible video player

VE Day veteran tells Sky News what the atmosphere was like when WWII was finally declared over in Europe

Personnel from NATO allies the US, France and Germany will be among those taking part in the procession in London.

The commemorations will begin with the words of Sir Winston Churchill‘s 1945 victory speech, spoken by actor Timothy Spall.

Thousands of people are expected to line the streets of the capital to witness the celebrations.

Please use Chrome browser for a more accessible video player

Codebreaker’s ‘special’ encounter with Churchill

Read more:
What’s happening to mark the 80th anniversary of VE Day?
When and where to watch VE Day flypast
Augmented reality brings to life the stories of VE Day 80 years on

On the anniversary itself on Thursday, marking exactly 80 years since the Allies formally accepted Germany’s surrender, a service of commemoration will be held at Westminster Abbey, to include a national two minutes’ silence.

Pubs across England and Wales, which usually close at 11pm, will also stay open for an extra two hours to allow punters more time to celebrate.

Continue Reading

Sports

Logano gets 1st win this season in OT at Texas

Published

on

By

Logano gets 1st win this season in OT at Texas

FORT WORTH, Texas — Reigning NASCAR Cup champion Joey Logano overcame a lot to get his first victory this season.

It came a week after Team Penske teammate Austin Cindric‘s win at Talladega, where Logano had a fifth-place finish that became 39th after a postrace inspection found an issue with the spoiler on his No. 22 Ford. There was also Logano’s expletive-laden rant on the radio toward his teammate in the middle of that race that the two smoothed out during the week. Oh, and he started 27th at Texas after a bad qualifying effort on the 1½-mile track.

But Logano surged ahead on the restart in overtime Sunday to win in the 11th race this year. He led only seven of the 271 laps, four more than scheduled.

“After what happened last week, to be able to rebound and come right back, it’s a total ’22’ way of doing things. So proud of the team,” Logano said.

On the final restart after the 12th caution, Logano was on the inside of his other teammate, Ryan Blaney. But Logano pulled away on the backstretch and stayed easily in front for the final 1½ laps, while Ross Chastain then passed Blaney to finish second ahead of him.

“Just slowly, methodically,” Logano said of his progression to the front. “Just kept grinding, a couple here and a couple there and eventually get a win here.”

Logano got his 37th career victory, getting the lead for the first time on Lap 264. He went low to complete a pass of Michael McDowell.

“I mean, there’s always a story next week, right?” Logano said. “So I told my wife last week before we left, I said, ‘Watch me go win this one.’ It’s just how we do stuff.”

On a caution with 47 laps left, McDowell took only two tires and moved up 15 spots to second. He ended up leading 19 laps, but got loose a few laps after getting passed by Logano and crashed to bring out the caution that sent the race to overtime. He finished 26th.

“We were giving it everything we had there to try to keep track position,” McDowell said. “Joey got a run there, and I tried to block it. I went as far as I think you could probably go. When Blaney slid in front of me, it just took the air off of it and I just lost the back of it. I still had the fight in me, but I probably should have conceded at that point.”

Odds and Ends

William Byron, Kyle Larson, Denny Hamlin and Chase Elliott remained the top four in season points. … Elliott left Texas last spring with his first victory after 42 races and 18 months without one. He hasn’t won since, and now has another long winless drought — this one 38 races and nearly 13 months after finishing 16th. … A crew member for Christopher Bell crawled in through the passenger side of the No. 20 Joe Gibbs Racing Toyota and was fully in the car to reconnect an air hose to the driver’s helmet during a caution in the second stage. It took two stops during that caution, and twice climbing into the car, to resolve the issue.

Fiery end to Hamlin streak

Hamlin had finished on the lead lap in 21 consecutive races, but a fiery finish on Lap 75 ended that streak that had matched the eighth longest in NASCAR history. He was the first car out of the race.

After the No. 11 Joe Gibbs Racing Toyota lost power, something blew up when Hamlin recycled the engine. Flames were coming from under the car and it was engulfed in smoke when it rolled to a stop on the inside of the track, and Hamlin climbed out unharmed.

Youngest pole sitter

Carson Hocevar, the 22-year-old driver who is McDowell’s teammate with Spire Motorsports, was the youngest pole sitter in Texas. He led only the first 22 laps of the race, losing it while pitting during the first caution. He finished 24th after a late accident.

Stage cautions

Both in-race stages finished under caution. Cindric won Stage 1 after Hamlin’s issues, and Kyle Larson took the second after a yellow flag came out because of debris on the track after the right rear tire on Chris Buescher‘s car came apart.

Larson got his 68th overall stage win and his sixth at Texas, with both marks being records. He has won a stage in each of the past five Cup races at Texas, starting in his 2021 win there.

Continue Reading

US

Trump calls for reopening of Alcatraz to house ‘most ruthless and violent offenders’

Published

on

By

Trump calls for reopening of Alcatraz to house 'most ruthless and violent offenders'

US President Donald Trump has called for the reopening of notorious prison Alcatraz.

In a post on his social media site Truth Social, Mr Trump said America had been “plagued by vicious, violent, and repeat criminal offenders”.

He added that when the United States was “a more serious nation” it “did not hesitate to lock up the most dangerous criminals”.

“That is why, today, I am directing the Bureau of Prisons, together with the Department of Justice, FBI, and Homeland Security, to reopen a substantially enlarged and rebuilt Alcatraz, to house America’s most ruthless and violent offenders,” he wrote.

Mr Trump said the reopening of the San Francisco prison would “serve as a symbol of law, order, and justice”.

The US president’s latest policy announcement comes after he fired national security adviser Mike Waltz last week in the first major change to his administration.

US President Donald Trump. Pic: AP
Image:
US President Donald Trump speaking to reporters on Sunday. Pic: AP

Alcatraz was infamously inescapable and in the 29 years it was open, 36 men attempted 14 separate escapes, according to the FBI.

More on Donald Trump

Nearly all of them were caught or did not survive the attempt at escaping.

The prison housed some of America’s most notorious criminals, including Al Capone and George Kelly.

It has also been the subject of a number of films, including The Rock, starring Sean Connery and Nicolas Cage.

Alcatraz Island. File pic: AP
Image:
Alcatraz Island. File pic: AP

Alcatraz Island, which is surrounded by strong ocean currents and cold Pacific waters, is now a major tourist site, operated by the National Park Service.

The prison’s closure in 1963 was attributed to crumbling infrastructure and high repair costs.

A spokesperson for the Bureau of Prisons said it would “comply with all presidential orders”.

The Bureau of Prisons currently has 16 high-security prisons, including its maximum-security facility in Florence, Colorado, and a facility in Terre Haute, Indiana, which is home to the federal death chamber.

The United States’ federal law enforcement agency has been the subject of increased scrutiny in recent years after Jeffrey Epstein‘s suicide at a federal jail in New York City in 2019.

Continue Reading

Trending