Trump Could Bring Us Economic Stagflation if He Wins

As the economy slows, businesses cut back and this will inevitably create a rise in the unemployment rate, completing the third aspect needed for stagflation. There is not a whole lot that capitalism, monetary and fiscal policy have in their bag of tricks to ameliorate the toxic combination of low growth, high inflation and rising unemployment that seems to be the base case for some high-level traders anticipating a Trump presidency. Some may try to affix an asterisk of “a presidency where Trump gets what he wants,” but after yesterday’s Supreme Court decision granting him the legal right to be King, that does not seem like an unreasonable expectation to have.

Capitalism can be grossly simplified as one giant hot ball of money that flows and divides itself into different arenas as the economy evolves, and in pullbacks, those tendrils contract back towards the core as everyone reduces their risk, which becomes exponentially more impactful the more money you have, especially in our modern Gilded Age. The economic data already suggests that this boom is slowing and Trump’s monstrous plan to deport 15 to 20 million people will kneecap an untold number of industries. Restricting immigration would further slow the economy, as it is perhaps America’s biggest economic competitive advantage.

Trump even proposed to eliminate the income tax entirely and replace it with a tariff that will either choke imports to death or not come remotely close to plugging the hole created in the budget by this cockamamie idea to upend a century of progressive taxation. You don’t need to be an economist to understand that taking in less revenue does not help you pay your bills.

And unfortunately for lefties, our run of being perpetually right about the national debt being a big ‘ol nothingburger died along with zero percent interest rates. The national debt is the favored cudgel of those in power to oppose any kind of government expansion that helps anyone with a net worth under six figures, and the only tangible impact of it at this present moment are the annual interest payments made on the debt. When interest rates were historically low, yeah, who gives a shit?

But when interest rates are around five percent? The annual payments on the pretty large mountain of national debt are not cheap, and they are complete wastes of money. As the United States Treasury notes, “As of May 2024 it costs $728 billion to maintain the debt, which is 16% of the total federal spending in fiscal year 2024.”

If the government is taking in less money, but its annual debt payments are increasing while the economy is slowing and battling high inflation, that…that is not good. It’s extremely not good, and is the kind of snowball that could accumulate a lot of speed and mass rolling downhill. If the situation deteriorated enough that it spooked the “world’s largest, most-important financial market” – Treasuries for “risk-free” United States debt – then all bets are off as to how bad this could get.

Predicting the future in a Trump-driven world has already proven to be a fool’s errand. What’s clear is that Trump’s racist immigration policies and idiotic economic theories are very likely to lead to higher inflation and slower economic growth, which would eventually bring rising unemployment along with it, AKA stagflation. In a world still dealing with the gargantuan weight placed on its shoulders during the COVID crisis, and which has scarcely been repaired from the Great Financial Crisis of 2008, the last thing this system creaking under the weight of its own corruption needs is literally the worst thing that can happen to an economy.