Former President Donald Trump's favorite campaign promise to voters would likely blow up in Americans' faces, economic experts told CNN on Tuesday.
Trump, the Republican presidential nominee, would be flirting with disaster should he try to wield the federal government's power to broadly knock down gas and utility prices to pre-pandemic levels, according to a new CNN report.
“The way to bring about deflation would be to create a massive recession,” said Justin Wolfers, an economist at the University of Michigan. “This is extremely dangerous and feeds on itself."
Wolfers predicted what CNN described as inescapable "doom loop" should Trump reverse course on the Federal Reserve's surprisingly successful efforts to slow inflation slowly and ease the rate at which prices rise, according to the report.
Savvy shoppers in-the-know about price drops in the near future would hold off on whipping out their wallets in the present, Wolfers explained.
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Businesses would then be forced to lower prices and the problematic loop would begin, he argued.
“The Fed would be terrified,” Wolfers said. “It’s very hard to get out of a deflationary spiral.”
CNN notes prices for gasoline, appliances, furniture and men's suits — and the rate of inflation — have all dropped in the past year, but that decrease has been tempered by slowly rising prices across the board.
This is preferable to Trump's proposed broad price declines, according to Moody’s Analytics chief economist Mark Zandi, who dubbed them “unrealistic and undesirable.”
An ideal rate of inflation, roughly 2 percent, allows the economy to grow as American paychecks rise with prices, said Zandi.
But businesses forced to lower prices would likely make a move that made it impossible for buyers to enjoy the cuts, the economist said: They'd cut paychecks.
“Bringing down prices sounds really exciting if I get to keep my current wage," Zandi said. "But you don’t."
