Trump 2.0 would be destructive for the economy, as the former president embraces 'crank' doctrine and economic fantasy, Paul Krugman says
Getty/Drew Angerer
- Trump's re-election could bring loads of problems to the US economy, Paul Krugman warned.
- The former president is prone to "magical thinking" and could pursue "destructive" policies, Krugman said.
- Inflation in particular could get worse if Trump imposes tariffs and erodes the Fed's independence.
Trump's re-election would not be good news for the US economy. Blame the former president's "quack" economic policy and his tendency to deny reality, according to Nobel economist Paul Krugman.
Krugman wrote in an op-ed for The New York Times this week on Trump's propensity for "magical thinking," the same way of thinking that led Latin American dictatorships to pursue reckless and inflationary monetary policy in the 1970s and '80s.
Similar "destructive" policies could be re-enacted in the US if Trump is re-elected in November, Krugman said.
"His behavior during the COVID-19 pandemic showed that he's as addicted to magical thinking and denial of reality as any petty strongman or dictator, which makes it all too likely that he might preside over the type of problems that result when policies are based on quack economics," Krugman wrote.
Some of Trump's economic policies during his presidency were flawed, Krugman said. He pointed, for instance, to Trump's tax cuts in 2017, which ended up favoring the rich over working-class Americans.
If re-elected, Trump has said he plans on cracking down on immigration and imposing tariffs on US imports, especially those from China. But those are deeply flawed ideas about what it would take to bolster US economic strength, Krugman said, as immigration has been key to robust growth in recent years, while high tariffs could easily stoke inflation.
Inflation could also get worse if Trump looks to exert control over the Federal Reserve, Krugman warned. He pointed to recent reports that suggested Trump's advisors were looking to reduce the independence of the Fed, putting the former president more in control of monetary policy. Presumably, that's to "juice the economy and the stock market the way he wanted to in 2019," Krugman said.
"What's really worrisome, however, are indications that a future Trump regime would manipulate monetary policy in pursuit of short-run political advantage, justifying its actions with crank economic doctrines ... The details of these bad ideas are probably less important than the mindset they reveal, one that rejects hard-learned lessons from the past and buys into economic fantasies," Krugman added.
Other economists have warned of potential chaos if Trump is re-elected as president. Top economist Nouriel Roubini said recently a second term for Trump would be one of the biggest risks for the world economy, making inflation and debt worse while hobbling economic growth.
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