Economist Kevin Hassett is considered a candidate for Fed chairman if Trump wins. On Tuesday, he defended the Republican presidential candidate and rebutted claims that Trump's policies would fuel inflation.
A week before the U.S. election, Hassett rebutted many economists' views. These economists believe that some of Trump's proposed policies, such as comprehensive tariffs and extending the Republican tax cuts from 2017, would be more inflationary than the plans of Democratic opponent Harris.
Hassett said that Trump's plans for tax cuts and deregulation are supply-side policies that will bring about 'supply-side growth.' 'When you increase supply, you exert downward pressure on inflation.'
So what about increasing the issuance of national debt? Hassett, who led Trump's Council of Economic Advisers from 2017 to 2019, emphasized that Trump must work with Congress to extend the 2017 tax cuts and implement his new proposals, such as not taxing tips or overtime pay.
Hassett stated, “Whoever is elected president, there will be a coordination process next year, meaning Congress will have to negotiate the overall deficit impact of its spending and tax policies, and the market will soon see this overall deficit impact, possibly in January or early February next year.”
Additionally, Hassett argued that the proposed tariffs by Trump need to be approved by Congress, even though other former Trump administration officials and Trump himself have stated that he essentially does not need legislative approval.
Hassett said, “Tariffs also require legislation; which tariffs can actually pass Congress? I think the most likely to pass is the Reciprocal Trade Act, which Trump mentioned last weekend at Madison Square Garden. We just need to set our tariffs equal to those imposed by other countries on us, so they will lower their tariffs.”
Hassett refuted the view that the rise in U.S. Treasury yields and gold prices is due to investors expecting inflation from a Trump presidency.
The rise in U.S. Treasury yields is due to higher real rates or because they expect higher inflation?” he said. “In fact, it is the higher real rates that are driving the current trend, as real rates rise when people expect the Fed's policy rate to stay around current levels, given the economy is very strong.
Earlier this month, a survey conducted by the Wall Street Journal of 50 economists showed that 68% believe inflation under Trump would be higher than under Harris, while 12% think otherwise, and the rest believe there is no difference between the two.
Article shared from: Jinshi Data