A growing chorus is concerned about the read-through of a prospective GOP election sweep for US fiscal policy, bond yields and inflation.

Those concerns aren’t confined to Donald Trump’s many critics. The worry, in a nutshell, is that between sweeping new tariffs, curbs on immigration and unproductive tax cuts, a unified Republican government might reverse whatever progress America’s made in the inflation fight while simultaneously underscoring the worst fears of those inclined to fret over deficits and debt.

Trump would argue such fears are overblown or he’d point to his first term as evidence that tariffs and unfunded tax cuts needn’t result in runaway inflation. Or — and this is the real worry — he wouldn’t argue at all. He’d just dismiss the whole discussion out of hand and go back to talking about the “deep state” or whatever else.

In other words: Many fear Trump doesn’t understand and, more to the point, doesn’t care to understand, why running a more aggressive version of his first-term policies might be perilous given a wildly different macro backdrop and what critics insist is a more urgent fiscal crisis. It doesn’t help that Trump habitually insists on his own business acumen while making the case. (“I’ll run the country like a business!” “Like one of your businesses?” “Sure!” “So… over-leveraged and in some cases bankrupt?”)

In any case, Trump’s odds of winning in November are good, according to polls and betting markets. Those would be the same polls and betting markets which were disastrously wrong in 2016, but… well, maybe pollsters and gamblers have learned.

The figure above, from JPMorgan, gives you some context. Trump’s got (better than) even odds of returning to the office he really (really) didn’t want to leave in January of 2021.

To make the obvious joke, those odds — a coin toss or better — are pretty good for a convicted felon.

In his latest, JPMorgan’s Nikolaos Panigirtzoglou walked through some of Trump’s key campaign proposals, including these:

1. Extend his 2017 Tax Cut and Jobs Act that are set to expire at the end of 2025
2. Severely restrict immigration with a plan to deport foreign-born illegal immigrants
3. Impose tariffs on all imports
4. Roll back much of Biden’s clean energy policies
5. Replace Powell (after his term ends) with some talk of changing the Federal Reserve Act to reduce the Fed’s independence

Needless to say, a lot depends on control of Congress. One hopes. One hopes Trump will be constrained by — or at least compelled to consult — Congress. If he’s not, this whole discussion will be more or less irrelevant. I won’t elaborate, but you get the point.

A red sweep, Panigirtzoglou said, “has a greater likelihood of resulting in major changes [to] fiscal, immigration, tariff [and] clean energy policies, the first three [of which] would likely be inflationary.”

Below, find a short excerpt from Panigirtzoglou, who walked through some of the specifics of Trump’s proposals, including and especially the math around extending the tax cuts:

Tariffs across all US imports are likely to lead to higher US prices. Severely restricting immigration is likely to put upward pressure on wages. And extending the 2017 Tax Cut and Jobs Act (TCJA) that are set to expire at the end of 2025 is likely to induce a more expansionary US fiscal and debt trajectory, thus also posing inflation risk. To see this it would be useful to look at the latest June 2024 CBO projections. The CBO said that the US budget deficit will increase to $1.92 trillion for the fiscal year ending September 2024, up significantly from the previous fiscal year’s deficit of $1.7 trillion. For the next ten years (i.e. fiscal period between 2025-2034), the CBO projects a cumulative deficit of $22.1 trillion, $2 trillion higher from its February projection. Apart from higher interest costs, factors pushing up long-term deficits include $1.6 trillion in increased outlays related to recent legislative changes, including extensions of the supplemental funding of $95 billion passed this year for Ukraine, Israel and the IndoPacific region. The CBO projects that US government debt held by the public at the end of 2034 would reach $50.7 trillion, or 122% of GDP, compared to the February forecast of $48.3 trillion, or 116% of GDP. The CBO estimates are based on current tax and spending laws and assume that individual tax cuts passed by the 2017 TCJA will expire as scheduled at the end of 2025. Making all of these cuts permanent as proposed by Trump would likely add another $4 trillion -$5 trillion to the next ten years’ cumulative deficit according to various estimates.

I suppose I don’t have to say this, but just in case: Those tax cuts aren’t going to “pay for themselves.” They (tax cuts) never do. That’s a myth.

Oh, and as far as Fed independence goes, JPMorgan gently noted that “changing the Federal Reserve Act to reduce the Fed’s independence seems unlikely to get enough support in Congress even if Republicans control both chambers.”

And yet, as Panigirtzoglou casually put it, “the rhetoric alone could have a market impact.”