President-elect Donald Trump campaigned on a promise to make inflation “vanish” — lowering the prices most Americans pay for goods and services.
However, fulfilling his campaign promise could prove more difficult now that he will take office this month. Inflation was at 1.9% during his first term, peaked at 5.2% under Biden, and is now at 2.7%.
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According to inflation experts, here are the two steps Trump should take and two he should avoid to help your wallet.
Trump campaigned to reduce government spending, including creating the Department of Government Efficiency (DOGE).
The advisory commission would seek to identify and eliminate wasteful government spending. The President-elect recently tapped Elon Musk and Vivek Ramaswamy to lead the commission and set a goal of cutting up to $2 trillion from the federal budget over the next decade.
However, the Committee for a Responsible Federal Budget estimated that the total impact of Trump’s economic policies would increase the federal debt by nearly $7.8 trillion.
This estimate includes Trump’s proposals to extend tax cuts set to expire this year, further decrease taxes for corporations and small businesses, increase border security and engage in mass deportations while increasing support for housing, health care, and long-term care. In addition, Trump proposed ending federal taxes on tip income, overtime pay, and Social Security benefits.
Even if the Department of Government Efficiency met its $2 trillion goal, there would be less money coming to the federal government’s coffers due to tax cuts and at least continued spending on housing, health care, immigration, and the military.
Wayne Winegarden, an economist at the Pacific Research Institute, said the adverse effects from the large and growing budget deficits “create inflationary pressure, as it pressures the Federal Reserve to implement inflationary policies.”
“Therefore, bringing the deficits under control is an immediate policy that the Trump Administration can implement that will help further reduce inflationary pressures in the economy,” Winegarden said.
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Trump promised to impose a 10% tariff on global imports into the U.S. and a 60% tariff on Chinese goods. Economists said the move would increase costs on everyday items and cause countries to retaliate by taxing U.S. exports.
“The Trump Administration should not implement policies, such as imposing broad-based tariffs or discourage global trade,” said Winegarden. “That will create temporary economic disruptions that will increase the prices of impacted goods.”
However, former Federal Reserve Chairman Ben Bernanke said that it was difficult to predict the inflationary impact of Trump’s trade tariffs because it’s unknown whether the President-elect is using them for political bargaining power or plans to keep them permanently.
Bernanke recently told a group meeting at the American Economic Association conference that “barring some very unusual situation, including perhaps political risks, it doesn’t seem like that’s going to shift the inflation path radically.”
During last year’s presidential campaign, Trump said, as president, he “should have a say” about interest rates.
With the recent resignation of Michael Barr, the Federal Reserve’s top regulatory official, Trump can appoint a clean slate of bank regulators.
However, the Federal Reserve was designed to oversee the nation’s monetary policy without political interference.
“The President should recognize the importance of an independent central bank,” Winegarden said. “However, it is also important to recognize that discretionary monetary policy also leads to mistakes, such as the recent inflationary surge. The President should support the Fed adopting a rule-based approach to monetary policy.”
Trump intends to fulfill his campaign promise of implementing a mass deportation of undocumented workers — a move that could affect 11 million people.
Researchers at the Peterson Institute for Economics found that deportations would lower the U.S. gross domestic product and increase unemployment. They predicted that agriculture would suffer the hardest because at least 16% of its labor force would be removed. Therefore, mass deportations could result in higher agricultural production and food prices.
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This article originally appeared on GOBankingRates.com: Inflation Experts: 2 Steps Trump Should Take and 2 He Should Avoid To Help Your Wallet
