Trump’s Economic Playbook: Get Clarity on Inflation, Taxes, and More
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Welcome to nerd is smart mini podcast. I'm test vigan in for Shawn piles .

and i'm on the hell host.

And this is a special edition of our weekly money news round up where we break down the latest in the world of finance to help you be smarter with your money. We're coming to you early this week because, well, the news calls for IT. Come january, Donald trump will once again be the president. Soon after, he'll likely began acting on some of those campaign proposals. So today we're going to run down president elect Donald trumps plans for the economy and your finances.

That's right. Exit polling done by N, B, C showed the economy was the top issue among tram photo. So in this episode, we're going to get into where trump stands on a bunch of different economic related issues, including his plans for lowering Prices, tax cuts, health care, housing and mass deportations, will also dive in what experts have said that his agenda could do to the economy.

And in case you missed that, we actually ran of four episode special series last month on how the presidential election could affect your finances, will put links to those episodes in toy's, shown notes in case you wanted deeper, dive into the topics we discuss today or visit nurdles let dog comes less podcast and you can find the episodes near the top of the page. okay.

So as on a mention, voters who chose trump were very concerned about the economy. Over the last few years, two aspects of the economy have been really strong employment and growth. But there's been one big thorn in the side of consumers.

And that inflation, while in, has slow down significantly in the federal reserve, has begun cutting rates. Prices haven't exactly gone down. And that dissatisfaction with the satisfaction seems to be reflected in the election outcome. So now that Donald trump t is president, what is he promising to do about Prices?

So there are four main plants that I point to. The first is one that he can attack through executive order. So it's going to take very seriously. And that's placing tariff on all imports.

He's proposing a ten percent to twenty percent tariffs on all foreign imports, up to sixty percent tariff on imports from china and anywhere from hundred percent to two hundred percent tariff on automobile produce in mexico. Trump argues that heteros would spur manufacturing in the U. S.

And raise revenue. Experts say IT will just increase costs that will be passed down to consumers. One of trump's favorite tag lines is drill, baby drill.

He wants to increase oil and gas production on federal lands. We will point out that gas Prices are most directly influenced by global market forces, but the president does have some influence. He also wants a cap.

Credit card interest rates at around ten percent, current rates around twenty one point five one percent. That would require congress to enact and would likely face a lot of legal push back. And finally, he has talked about bringing the federal reserve under the power of the president, which would presumably mean that the president could tell the fed to cut interest rates.

But experts believe that I could weaken the credibility of the fed, which could impact investors confidence in the fed and ultimately have political and economic gram fictions. What trump can do is president is a point. Members of the federal reserve board, he appointed the current fed chair drone power, but has since been quite critical of them.

On a speaking of the fed, lets briefly also address its actions. Last week, in the middle of post election fever, the reserve banks open market committee announced a quarter point cut in the benchmark federal funds rate. This is what most economists expected happen.

IT is, and this is the second rate cut this fall, coming after a half point cut in september. This will lower interest rates on everything from credit cards to Carlos, possibly mortgages, although the september cut didn't have as much an effect on that as you might have expected, that was in part because rates had already come down in anticipation of that cut. But the real entree here is what effect trumps election will have on the feds plans, because many economists agree that all of these plans for tariff s and tax cuts and even immigration could rebu inflationary pressures. That in turn could slow the fed's plans to cut interest rates.

All right? Speaking of taxes, trumps plan for those arguably would have the most direct impact on consumers. I will point out the tax changes need the support of congress before they can be enacted. But I know what do you want to do there.

So at the end of next year, trumps twenty seventeen tax cuts and jobs act is expiring. That includes state taxes as well as individual income tax cuts. It's likely he will extend those cuts.

There's one measure that was in the tax cuts and jobs act that trump wants to reverse, and that's a phase out of right ffs, for R N D expenses in a businesses first year. Instead, he wants to add attacks credit for businesses to write off every one of those first year expenses. During his first term, trump cut the corporate tax rate from thirty five percent to twenty one percent.

This time around, he wants to cut IT down by just one percentage point. That first big cut had a huge impact on the biggest U. S.

corporations. They saw profits rise by forty four percent, while the federal tax bills declined by sixteen percent. Trump also promised to exempt workers from paying taxes on their tips calmly. Harris also made that pledge.

But experts say IT doesn't help as many tipped workers as IT seems, because the benefits of that policy change mainly go to employers and the very wealthy who could potentially find a look pole and say that they are earnings or tips. One more promise i'd like to point out is this plan to replace personal income taxes with terrorists. S again, we'll get into why that's not the most beneficial idea later.

All right, on the health care, the first time around, trump wanted to repeal and replace the affordable care act, obama care, but he was unsuccessful during the presidential debate on september tenth this year when asked if he would try again, he said only that he had concept of a plan. So IT doesn't seem like that'll be a cornerstone is next presidency. IT doesn't .

trumpton focus too much on health care in general. This time around, what he did say were two important things regarding reproduction health. He said abortion should stay with the states but would veto any federal ban. He also said that the government or insurance company ies should cover ibf, which is a departure from what many other members of the top of said.

another area where trump t didn't have a whole lot to say was housing, right?

Yeah, he had one specific issue plan and one vague plan. First, he wants to open up federal lands for new housing developments. There is precedence for doing this, but experts say that much of the federal land wouldn't be ideal for new housing, and most of that land is in the west. He's also talked about cutting red tape for building new housing without offering any specifics about what their red tape is. However, most rules around housing happened at the local level, so it's not a parent exactly how much influence the president can have there.

That brings us to our last proposal and trumps most controversial one, mass deportations of unauthorized immigrants. He has promised to round u p 0 and deport millions in a plan。 He calls Operation a ora. And you spoke with experts who said that there would be serious economic consequences to those.

That's very test. And this was an issue we didn't get a chance to talk about during our election series. Beyond the humAnitarian implications of trump, s macy.

Portion plans are very serious economic ones. Deporting a huge group of people would reduce the labor supply in key sectors of our economy. These are industries that rely on immigrant workers, like construction, agriculture, manufacturing and hospitality.

So if you don't have as many construction workers, the new housing, you don't get new homes, and the housing shortage worsens, which means Prices for housing increase without as many agricultural workers and hammers or food supply, which would drive up Prices there. And remember red, during the pandemic, when there was a shortage of workers and hospitality in restaurants, people got annoyed that service was slow or places weren't open as often. Then businesses have to raise wages to attract more workers, and those costs were passed down onto the consumer.

Well, buckle up because that scenario could very well happen again if an entire segment of that workforce is removed entirely. Also mentioned one other thing, if you deport workers, IT also reduces tax revenue and contributions to build social security and medicare benefits that unauthorized migrants pay into but are not eligible to receive. What's unclear about all these proposals, tests is which one's standalone trumper pursue on his own, what he will instruct different government agencies to do, and what legislative measures congressional actually approve. There are some proposals like mass deportations that would most certainly end up facing legal chAllenges.

Thanks for that overview on a, we will talk more about what experts think of trumps plans after the break. Stay with us.

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All right, honor. As you mentioned, trumps ability to enact all of his proposals will face chAllenges, and it's still not clear what he'll pursue anyway. But for now, all the economists and policy analysts have are those promises and this track record to go on. So is there some contentious among those experts as to how trumps second presidency might unfold?

Yeah, so there seems to be a great upon projections that trumps proposals would likely be inflationary and could variable landis in recession. Neither of those is what anyone wants, certainly not right. After inflation is slowed and we achieved the soft landing that the fed said we needed in order to avoid a recession and even one of Donald trump's most outspoken and wealthier supporters, elon musk, has said that there may be, quote, temporary hardships as a result of trump s plans for spending cuts.

So beyond elon mask, what the economist said about trump's plant.

first off, they've been two letters by nobel prize winning economists that have been released. Trust campaign kicked off the most recent from october, says the trumps. Policies like, quote, high, terrify that even on goods from our friends and allies. And regressive tax cuts for corporations and individuals will lead to higher Prices, larger deficits and greater inequality. Another analysis done by economies at moody analytics, that's the research division of one of the world's most prominent bond rating agencies, said the two dominant contributors to igniting inflation and a potential procession under trump are his tariff plans and massive potations .

for listeners here. Terriers are essentially taxes on imports. There used to increase revenues for the federal government, protect domestic industries, or as a unitive foreign policy tool, and as president trump, levy tariff s ranging from ten to fifty percent on a lot of deep goods, mostly from china. But the cost of those terrifying tends to fall back on consumers.

That's right. The center for tax policy finds that trumps heros would cost the typical household twenty six hundred dollars per year in Price increases, and the tax foundation says the proposals may not effectively offset tax revenue losses from his tax cuts.

Speaking of tax cuts, what can people expect with trump plans?

The institute on taxation and economic policy didn't analysis that found the trump s cuts would only benefit the wealthiest americans, mainly those earning three hundred sixty thousand dollars a year and up. Otherwise, if you earn anywhere from nothing to just under three hundred and sixty thousand dollars, your taxes will go up, and that burden would fall greatest on low income americans. However, some provisions like the elimination of taxes on social security benefits would be beneficial to taxpayers in general. And analysis by the wharton school trumps oma water found that if trump fills his campaign promises to extend his tax cuts and jobs act, eliminate those social security taxes and lower the corporate tax rate, then household across the board .

would see benefits. So big picture, what could happen at the macro level as a result of these potential changes?

The picture is a little less rosy in the long run. The warn school says that the U. S.

Deficit would increase by an estimated four point one trillion dollars over ten years. yeah. So for perspective, the deficit for fiscal year twenty twenty four is one one point eat three trillion.

Another remit by the committee for a responsible federal budget projects that trumps tax cuts increase the national debt by nine point one five trillion dollars over ten years. Wow, the national debt is currently near thirty six trillion dollars. When he comes in GDP.

The word analysis also says there would likely be a bump initially before falling by zero point four percent in twenty and thirty four and two point one percent over thirty years. Something else like a impact GDP, or the mass deportations. And analysis by the american immigration council found that the trumps plan to conduct deportations comes to pass IT would result in reduction in GDP anywhere from four point two ent to six point eight percent.

As a reference point, during the great recession, GDP went down by four point three percent. And the last thing i'll mention is this despite elevated Prices compared to before the pandemic, trump is inhering a strong economy with steadily declining inflation, a stable job market, healthy growth and the fed rates coming down. That's a good starting place for any president being honor.

Thank you.

Great rap up. Yeah, anytime. All right.

That's IT for this week's money news. We always welcome your money questions and comments turn to the nerds and call or text us your questions at nine o one seven three zero six three that's nine one three zero N E R D or sentence of voice memo at podcast at nerd wallet dot com and remember, you can follow the show on your favorite podcast APP including spotify, apple podcast and I heart radio to automatically download new episodes today's .

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and what that said until next time turn to the nerds.