There is good news and bad news on the inflation front. The good news is that inflation has come down from its May 2022 high of 9 percent to close to the Federal Reserve’s 2 percent inflation target. The bad news is that, if implemented, President-elect Donald Trump’s economic plan will lead to the return of inflation. The markets have noticed this. Ten-year Treasury bond yields have risen sharply, a strong bid for gold, and a rise in inflation expectations.

Among the main reasons for concern that inflation will return next year is the slew of tax cut promises Mr. Trump made during the election campaign. Not only did he commit to extending the 2017 Tax Cut and Jobs Act, but he also committed to reducing the corporate tax rate from 21 percent to 15 percent and eliminating taxes on social security benefits and tips.

These measures must be expected to cause the budget deficit to swell........

© The National Interest