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As the election nears, an analysis of Donald Trump’s economic proposals

STEVE INSKEEP, HOST:

In a presidential election, it's commonly said that voters make their choices based on the economy. So what really is the choice that voters face this November? We heard part of the argument yesterday. A CEO who supports former President Donald Trump criticized President Biden's economic performance in office. John Catsimatidis is the leader of Red Apple Group.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

JOHN CATSIMATIDIS: The people that are at hedge funds and - are having a great time. People that own stocks are having a great time. But I'm a businessman. I run companies day to day, and we're concerned about the interest rates. We're concerned about - the real estate industry is about to take - how do they say it in Brooklyn? - take the pipe.

INSKEEP: What we hear less is what Donald Trump would do differently. So we brought in David Wessel, director of the Hutchins Center at the Brookings Institution and a regular guest on this program, to look at some of Trump's economic proposals. David, good morning.

DAVID WESSEL: Good morning, Steve.

INSKEEP: OK. So what are a few big things the former president wants to do if he is sent back into office?

WESSEL: Well, he says a lot of things. And it's hard to know what he would really do or what Congress would go along with. But he said - pretty clear enough - several things. One, he loves tariffs. He wants to increase tariffs. Two, he loves tax cuts. He wants to extend the 2017 tax cuts and maybe even cut taxes more for big businesses. And third, he has a strong antipathy to immigration. Those are the three big things.

INSKEEP: OK. Now, that's all really interesting because we're in this environment where people are concerned about inflation, people are concerned about interest rates, a variety of other things. So what are some likely effects of Trump's proposed policies on the things that people say they're concerned about?

WESSEL: Right. Well, I do think that Trump would employ less aggressive regulators than President Biden has appointed, and that would probably reduce costs and maybe prices. But increasing tariffs - 10% across the board, he's floated - that would definitely spill over to increase consumer prices. And his adviser, Bob Lighthizer, has acknowledged that. And he says that's the price that's worth paying to protect American manufacturing and make American communities better off.

And then yesterday on Capitol Hill, President Trump started talking about replacing the entire income tax with tariffs, which would be a huge shift from rich people to poor people because rich people pay more money in income taxes than poor people. But if you shift the burden of paying for government to tariffs, that would be very regressive.

And finally, we know that deporting lots of immigrants or preventing more immigrants from coming here would tend to create labor shortages in some industries. That would probably raise costs and prices. And discouraging high-skilled immigrants from coming here would definitely have long-run, bad implications for the economy.

INSKEEP: I want to understand what you're telling me, David Wessel, because we have an environment where people are concerned about inflation, and you're telling me that Trump is proposing things that, according to economists, would seem to be inflationary to encourage higher prices.

WESSEL: That's exactly right.

INSKEEP: What about interest rates?

WESSEL: Ah. So interest rates and inflation are primarily the responsibility of the Federal Reserve. And in the U.S., as in other major modern democracies, politicians said, don't trust us with interest rates and inflation. Let's insulate the central banks from political pressure so they can do the unpopular stuff when it's necessary, as, in fact, they've been doing recently. Well, President Trump - or President-candidate Trump - does not value Fed independence.

Now, he might not be able to do much about that in his first couple of years if he's reelected. Jay Powell, the Fed chair, has a term that extends till March 2026. But to the extent that he erodes confidence in the Fed, threatens its independence - that's likely to unsettle global investors, worry that the Fed won't be able to control inflation, create a lot of uncertainty. And that would probably lead bond markets to push up the interest rates that we pay on things like mortgages and car loans.

INSKEEP: Interesting. Now, let's talk about another aspect of this. There is a way in which Republicans say that President Biden is partly responsible for inflation because he has signed into law immense budgetary measures that involve trillions of dollars of borrowing - previously unimaginable amounts of borrowing in some cases. And it is argued that extra government borrowing, extra government spending does add to the pressure for inflation. So what, if anything, would Trump do differently if he's in office next year?

WESSEL: Well, he has said he wants to extend the tax cuts that were enacted in his first term. That would mean that projections of the debt that we now have would look even worse. He talked yesterday about cutting the corporate tax more. So on that side, he's going to make the deficit worse. And then he talks tough about cutting spending, but he didn't do much of that in his time as president. And he basically says, we're not going to touch Social Security. We're not going to touch Medicare. We're not going to do anything about raising taxes, raising revenue. That's a recipe for more debt, more pressure on interest rates and possibly more inflation.

INSKEEP: A populist economic agenda. David, thanks so much - really appreciate it.

WESSEL: You're welcome.

INSKEEP: That's David Wessel, director of the Hutchins Center at the Brookings Institution, with an assessment of presidential candidate Donald Trump's economic policies. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.