Make America affordable again

The Republican National Committee just released its 2024 platform. While calling it a platform is a stretch, the list of bullet points gives an idea of what the potential next Trump administration’s goals are. Here’s one issue that should be front and center: End inflation and make America affordable again.

To be sure, "make America more affordable" would be a great slogan and a great objective. It’s similar to what many have called an "abundance agenda." While there is plenty to dislike in a platform that at times feels unserious and destructive, this part, I like.

Abundance isn’t achieved by the same old subsidies or tax breaks for special interests, price controls or spending loads of taxpayer money on transfer payments. It’s achieved by freeing up the supply side of our economy. That means freeing producers and innovators from excessive regulatory obstacles and heavy tax burdens (including tariffs) so they can provide more of what Americans need.

The Trump administration platform assures us it will move in this direction. For instance, it wants to increase America’s dominance as an energy producer, which will only be achieved through a deregulation agenda. Apart from counterproductive tax incentives for first-time homeowners, it expresses a commitment to lowering housing costs through deregulation.

The platform states it will "cancel the electric vehicle mandate and cut costly and burdensome regulations" as well as "end the Socialist Green New Deal." I assume that means ending the expensive subsidies and tax breaks in the Inflation Reduction Act. Great idea, but get ready to hear all the recipients of these handouts cry that they won’t be able to do what they were already doing before being given the subsidies.

A deregulation agenda would serve the Republicans’ goal of boosting manufacturing much better than tariffs, which former President Donald Trump continues to love despite overwhelming evidence that they don’t do what he claims. Most tariffs raise the prices of inputs used by American firms, including manufacturing, to produce outputs that serve their customers.

Something similar could be said about Republicans’ swipes at immigrants. Fewer immigrants will create labor-supply shortages, hurt manufacturing and slow the economy.

Still, even with their disastrous trade and immigration agenda and the many contradictory goals espoused by this platform, implementing the deregulatory part of the agenda will make some strides at freeing the supply side and hence lowering prices. Indeed, President Joe Biden has not only maintained many of Trump’s tariffs, but he’s added some of its own. He’s also systematically favored subsidizing the demand for certain things — nudging customers to buy what he wants them to buy — while taking actions that restrict supply. That’s a recipe for affordability failure.

But as far as affordability goes, I’m less optimistic about the prospect of the next administration ending inflation. That’s because Trump and other Republicans are firmly embracing fiscal irresponsibility and excessive debt. The platform contains no mention of a plan to get government debt under control. Instead, it pledges to "fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age."

Many voters love hearing this promise. But maintaining these two objectively underfinanced programs will inevitably explode the debt burden over the next 30 years. In the entire history of the United States so far, Uncle Sam has accumulated roughly $34 trillion in debt. Under the Trump plan, the government would need to borrow another $124 trillion for these programs alone.

Leaving aside the question of who will lend us all this money when foreign buyers are already scaling back purchases of U.S. Treasuries, remember that most of the inflation we’ve recently suffered is the product of massive Biden administration spending on top of the COVID-19 spending without any plan to pay for it. As such, announcing that the U.S. will simply go on another borrowing spree sends a poor signal, and it might even increase inflation.

This is made more important because Trump wants to make permanent the tax cuts that are set to expire after 2025, end taxes on tips, and more. If Congress and the president do this without any offsetting spending reductions, it will add at least another $4 trillion in debt over 10 years. With more inflationary fuel, we could easily see the Federal Reserve raise interest rates again, making borrowing money even more expensive than it already is.

The bottom line is that Trump’s deregulatory agenda could have a shot at lowering some prices. But it will only be a game-changer if he becomes serious about fiscal responsibility. Right now, he isn’t, so I wouldn’t count on it.