Donald Trump’s presidential victory over Kamala Harris was a call for change by voters frustrated by high prices and angry over the influx of undocumented immigrants on the southern border.
Voters’ rejected the Biden-Harris Administration’s current economy, which continues to outperform the rest of the world, a reflection of the impatience of people to feel the effects of economic improvement at the grocery store and gas pump.
The current administration’s economic measures, however, provided 2.8 percent growth in GDP in Q3 2024, created a record 15.7 million new jobs — 700,000 in manufacturing — since the pandemic, and lowered inflation from 9 percent in 2022 to 2.1 percent today.
U.S. Deficit Will Soar Under Trump’s Proposals, Sparking More Inflation
Trump’s supporters are now anticipating lower taxes, lower prices immediately, and deregulation of government rules on everything from environmental protections to public health and industries, including banking and cryptocurrencies.
While his supporters’ most pressing issues were the economy and illegal immigration, they might be surprised to learn that Trump’s 20-point platform, which includes fiscal proposals that will grow the nation’s deficit has the potential to fuel another round of inflation and stymie investment in housing and other real estate sectors, as well as reverse environmental protections at a time when the nation has been devastated by hurricanes, flooding, tornadoes, and wildfires.
According to an analysis by the Committee for Responsible Federal Budget (CRFB), a nonpartisan, non-profit organization committed to educating the public on issues with significant fiscal policy impact, Trump’s proposed fiscal agenda would raise the federal deficit between $7.75 trillion and $15.5 trillion over the next decade, “Trump's agenda is potentially inflationary in three different ways,” said Marc Goldwein, CRFB senior vice president and senior policy director, noting that enacting his proposals would involve $2 trillion in spending over the next 18 months.
Trump’s Fiscal Plan May Stymie Real Estate Investment
Since the Fed lowered its rate by 50 basis points last month, real estate investors had hoped for another cut this year and early next year to create investment momentum and increase asset valuations. But according to Goldwein, that is unlikely under Trump’s proposed economic scenario. The tax incentive elements of his plan should boost investment but this could be more than offset by the high cost of debt, which is the number one cause of low asset valuations, increased distressed sales, and the drop in real estate investment and development activity since the Fed’s rate increases in 2023.
The additional deficit borrowing and its impact on inflation make it less likely the Fed will reduce interest rates as much as investors had hoped for or at all, Goldwein continued. “And the second thing it might do is make reducing near-term interest rates less effective in lowering long-term mortgage rates,” he added, noting that since the Fed cut its rate last month, the 10-year Treasury has gone up by 70 basis points, and mortgage rates have followed.
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