The Mirage of Prosperity: How Trump’s Economic Fantasy Could Collapse the American Dream

The Mirage of Prosperity: How Trump’s Economic Fantasy Could Collapse the American Dream

Donald Trump’s 2024 economic policies, if enacted, would set the U.S. on a path of short-term political gains at the cost of long-term economic instability. His platform, centered on mass deportations, high tariffs, permanent tax cuts, and the politicization of the Federal Reserve, may appeal to populist sentiment, but these measures carry severe risks for American prosperity. The structural impact of these policies can be better understood by looking at past U.S. economic crises, applying statistical data, and evaluating how each policy disrupts vital pillars of economic health: consumer prices, labor markets, trade, and government finances.

How Mass Deportations Will Erode Labor Markets and Consumer Prices

One of Trump’s most controversial proposals is to deport 11 to 13 million undocumented immigrants. The U.S. economy is heavily reliant on immigrant labor, particularly in sectors like agriculture, construction, and hospitality. Historically, immigrant labor has filled gaps that native-born workers are less likely to fill, often due to low wages and tough working conditions. Deporting such a significant portion of the workforce would devastate these sectors and create labor shortages that drive up wages, which, in turn, would lead to higher consumer prices.

For example, California’s agricultural sector relies heavily on immigrant labor. According to the Carsey School of Public Policy, deporting millions of workers could result in a 10-18% reduction in available labor in industries like agriculture, construction, and food services. When a similar but smaller labor contraction occurred during the Bracero Program’s end in 1964, farm wages increased, but so did the cost of produce for American consumers. A mass deportation under Trump’s plan would repeat this history on a much larger scale, inflating prices for goods like produce and construction materials.

Tariffs: A Double-Edged Sword on Trade and Prices

Trump’s tariff policies—particularly his proposed 20-60% tariffs on imports from countries like China—are another pillar of his economic platform. While tariffs are intended to protect domestic industries, they historically tend to backfire by raising consumer prices and reducing the purchasing power of Americans.

We’ve seen this before. In 1930, the Smoot-Hawley Tariff raised import duties on thousands of goods, aiming to protect American jobs during the Great Depression. Instead, the tariff provoked retaliatory measures from other countries, reduced global trade by nearly 66%, and deepened the economic crisis. The U.S. economy suffered as a result, with GDP falling by nearly 30% from 1929 to 1933.

Similarly, under Trump’s first administration, the 2018 tariffs on steel and aluminum raised costs for American manufacturers. According to the Peterson Institute for International Economics, Trump’s tariffs cost American consumers an estimated $57 billion per year due to higher prices. In 2024, Trump is doubling down on this strategy, proposing even more aggressive tariffs. This would raise prices on everything from electronics to household goods, as American companies would be forced to pass on the higher costs of imported goods to consumers.

Tariffs act as a hidden tax on consumers. The higher the tariff, the more expensive imported goods become, and while Trump claims these tariffs will make the U.S. a “manufacturing superpower,” the reality is that consumers will bear the burden of increased costs. Economists estimate that under Trump’s proposed tariff plan, American households could see an additional $2,000 to $4,000 in annual costs for basic goods.

Tax Cuts and the Deficit: A Repetition of the 1980s?

Trump’s tax policy centers on making the 2017 Tax Cuts and Jobs Act (TCJA) permanent while reducing the corporate tax rate to 15%. On the surface, tax cuts may seem like a surefire way to stimulate growth by putting more money into businesses and consumers’ hands. However, tax cuts without offsetting spending reductions tend to balloon the federal deficit.

Take the Reagan-era tax cuts as an example. In the early 1980s, the Reagan administration slashed top income tax rates and reduced corporate taxes. While the economy did grow, the federal deficit soared as government revenues shrank. By the time Reagan left office, the U.S. national debt had tripled, from $997 billion to $2.85 trillion. The U.S. had to increase borrowing, which drove up interest rates and crowded out public investment in infrastructure, education, and healthcare.

Trump’s 2024 tax plan follows a similar pattern. The Penn Wharton Budget Model estimates that making the TCJA permanent would add $5.8 trillion to the federal deficit over the next 10 years. Additionally, Trump’s promise to eliminate taxes on Social Security benefits would cost another $1.6 to $1.8 trillion. Rising deficits lead to higher interest payments on national debt, which the Congressional Budget Office warns could eventually consume a significant portion of the federal budget, leaving less room for vital public services and infrastructure investments.

The Reagan administration also saw significant increases in income inequality, a likely outcome under Trump’s tax cuts. The cuts disproportionately benefit corporations and high-income earners, while lower-income families see marginal benefits. Over time, this inequality could fuel social unrest and stagnate broader economic growth, as consumption, the primary driver of U.S. economic growth, becomes concentrated in fewer hands.

The Politicization of the Federal Reserve: Destabilizing Monetary Policy

Trump’s efforts to install a “shadow” Federal Reserve chair who answers directly to him would undermine the Fed’s independence. Central banks work best when insulated from political pressures, as seen in the Volcker Fed in the late 1970s and early 1980s, which raised interest rates sharply to combat runaway inflation. This was a politically unpopular move, but it succeeded in stabilizing prices and restoring long-term growth.

If Trump politicizes the Fed, monetary policy may shift toward short-term political objectives—such as artificially keeping interest rates low to boost growth before elections—at the expense of long-term stability. This could mirror the Nixon era, when pressure on the Fed to keep rates low led to unchecked inflation in the 1970s. Trump’s policies could repeat this mistake, resulting in inflationary spirals, loss of investor confidence, and a weaker dollar.

History Repeats Itself

The lessons of U.S. economic history are clear: policies like mass deportation, aggressive tariffs, unchecked tax cuts, and politicized central banking lead to short-term pain and long-term stagnation. From the Smoot-Hawley Tariff to the Reagan deficits, past U.S. economic experiments show that these measures erode America’s economic foundation. Trump’s policies would burden consumers, shrink GDP, and destabilize federal finances. Far from reviving the American Dream, Trump’s economic vision risks collapsing it under the weight of higher costs, larger deficits, and reduced growth.

Works Cited

• Carsey School of Public Policy. Economic Impact of Mass Deportation: A Literature Review. University of New Hampshire, August 2024. https://carsey.unh.edu/sites/default/files/media/2024-08/economic-impact-mass-deportation-lit-review.pdf.
• Center for American Progress. The Economic Impacts of Removing Unauthorized Immigrant Workers. August 2024. https://www.americanprogress.org/article/the-economic-impacts-of-removing-unauthorized-immigrant-workers/.
• Politico. Donald Trump and JD Vance: Policy Positions for the 2024 Election. September 2024. https://www.politico.com/interactives/2024/donald-trump-jd-vance-policy-positions-2024-election/.
• Politifact. Donald Trump’s 2024 Campaign Promises: Here’s His Vision. September 30, 2024. https://www.politifact.com/article/2024/sep/30/donald-trumps-2024-campaign-promises-heres-his-vis/.
• Penn Wharton Budget Model. Trump Campaign Policy Proposals for 2024. August 26, 2024. https://budgetmodel.wharton.upenn.edu/issues/2024/8/26/trump-campaign-policy-proposals-2024.