FACT BRIEF

Did economists warn that the Trump tax cuts could cause inflation?

Monday, May 30, 2022

By Lisa Freedland

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YES

Economists warned that Trump's 2017 Tax Cuts and Jobs Act could cause inflation by spurring spending.

According to the Tax Policy Center, by putting more money in people's pockets, tax cuts increase consumer demand, creating supply pressures that result in price hikes.

Mark Zandi, chief economist for Moody's, told Detroit Free Press in 2017 that the Trump tax cuts could force the Federal Reserve to raise interest rates in an attempt to stave off inflation, which would dampen growth and threaten recession.

Reuters similarly reported in 2017 that the tax cuts added to the Federal Reserve's preexisting inflation concerns.

However, inflation hovered around 2% throughout the first three years of Trump's presidency before declining in 2020 due to the COVID-19 pandemic.

The current inflation spike began in the spring of 2021 as rebounding demand, paired with supply-chain disruptions, drove up prices.

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Sources

Detroit Free Press Trump's tax plan designed to spur growth, but will inflation heat up?

Tax Policy Center Note To Governors: Cutting Taxes Will Make Inflation Worse, Not Better

Reuters Fed, wary of inflation, could lean against Trump tax cut

US Inflation Calculator Current US Inflation Rates: 2000-2022

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