Trumpflation is Here

Dean Baker

October 20, 2026
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Donald Trump loves to put his name on things, and when it comes to the recent burst of inflation, it’s totally deserved. Trump and Republican politicians are doing their best to try to make a simple story complicated. But there is no doubt that Trump is the leadand almost sole author of the inflation we are now seeing.

Just to quickly clear away the stupid: We did have a large burst of inflation under Biden, just like the rest of the world. We were hit with a worldwide pandemic in Trump’s first term, which he apparently can’t remember. The pandemic led to a massive fall in output in 2020, while Trump was president.

When Biden took office in January of 2021, we were still down more than 10 million jobs from the pre-pandemic level. Biden’s recovery package quickly got back the lost jobs and got the unemployment rate down to 4.0 percent by the end of the year, far faster than anyone expected.

The reopening of the economy from the pandemic recession led to a burst of inflation in the United States, as it did in Germany, France, and everywhere else. Suddenly people were buying lots of things, and it took a while for businesses to ramp up production.

If Biden had cared less about getting people back to work, the recovery package could have been smaller, and the peak inflation rate might have been 1-2 percentage points lower. But the important part of the story is that inflation quickly came down.

Year-over-year inflation peaked at 9.0 percent in June of 2022. A year later, it was down to 3.1 percent. It was down to 2.6 percent by the election in November of 2024. Inflation was generally expected to continue to fall and to be at or near the Fed’s 2.0 percent target by the end of 2025.

But then Trump turned everything around. Inflation began to rise even before he took office, as households and businesses stocked up on imported goods in anticipation of Trump tariffs. Durable goods prices, which had been falling since early 2023, stopped falling and began to rise. The Consumer Price Index also stopped falling and started to rise. Year-over-year inflation hit 3.0 percent in September 2025 but then slowed to 2.7 percent by the end of the year.

It likely would have continued to slow through 2026. After all, Trump’s tariffs were primarily a one-time event. If he didn’t keep imposing new ones (a big “if”), it was reasonable to think that inflation would settle back down to its pre-tariff pace.

But we never got to test that theory. Trump decided to go to war with Iran at the end of February. As we all know, the stated rationale was crazy. Iran was not close to having nuclear weapons, and Trump himself had boasted about destroying the country’s nuclear program in a bombing strike the prior summer.

Logic doesn’t mean much to Donald Trump. He and Israel’s Prime Minister Benjamin Netanyahu wanted to attack Iran, and whatever story they came up with was secondary.

Anyhow, regardless of their motives, they apparently did not expect that the Iranian government would both survive and retaliate by blocking oil from going through the Strait of Hormuz. This sent oil prices soaring, which is the biggest element in the current burst of inflation. However, since oil is not just gas for our cars, but also diesel, which is needed for transporting just about everything, the price hikes are spreading throughout the economy. Also, since much of the world’s fertilizer production takes place in the Gulf countries, fertilizer prices are also soaring. This had some effect on crops already but will be a much bigger deal next year.

The broad impact of Trump’s war on inflation can be clearly seen in the Producer Price Index. The latest year-over-year figure was 6.3 percent for September. Since this is inflation at the wholesale level, it will be showing up at the consumer level in the next few months. To be clear, the impact is not one-to-one, so this doesn’t mean that consumer inflation will be rising to 6.3 percent, but it means that the direction of change in future months will likely be higher, not lower.

This is very far from a number consistent with the Fed’s 2 percent target. And this is all Trump’s doing. One important difference from the 1970s inflation is that, unlike the 1970s, wages are not rising in step with inflation. The pace of wage growth slowed from 4.0 percent in 2023 and 2024 to 3.0 percent in the most recent data. This means that workers are falling further behind as prices accelerate. The higher prices are going to profits, not covering higher labor costs. That might be good news for Trump’s billionaire donors, but not for the rest of us.

This first appeared on Dean Baker’s Beat the Press blog.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

Trumpian Corruption and Minnesota Fraud

Dean Baker

 October 21, 2026

The Republicans have been so successful at hyping the fraud around the Feeding Our Future child nutrition program in Minnesota that even liberal Democrats reflexively all say “fraud” when they discuss Minnesota. Apparently, it is news to even well-informed types that Trump and his sycophants lie about liberal politicians, especially successful ones like Minnesota Governor Tim Walz.

Rather than wallow in contrition over the fraud that took place, it would be worth spending more time in Reality Land. No one should ever apologize for fraud. It is a serious crime, especially when the money was designated for a nutrition program designed to help children from low- and moderate-income families.

But we need a sense of proportion. Fraud in government programs will never be zero. As with the private sector (can you say Enron?), people will try to cheat. And they do a lot of cheating on their taxes, ripping us off to the tune of more than $600 billion a year, according to the I.R.S.

How much did the bad guys in Minnesota (yeah, some were Somali immigrants – really bad) steal from us? The best figure I could find puts it at around $250 million. That’s not trivial, but this was a pandemic-era program, started in Trump’s first term, where the priority was to get money out quickly.

GAO put the amount of fraud in pandemic programs at over $300 billion. Minnesota has a bit less than 2 percent of the country’s population. This means that Minnesota should have had around $6 billion in fraud if it was keeping up with the rest of the country. Looks like Governor Walz is lagging far behind in the fraud category.

To be fair, there has been fraud in other government programs in Minnesota. While there have been wild claims about the amount of fraud in Minnesota’s Medicaid program, the evidence that has been made public puts it in the $60-$90 million range. This is over several years, in a program that spends well over $900 billion a year nationally. So again, there is not much evidence that Minnesota is especially bad in the fraud category.

Trumpian Corruption

People naturally get upset when they see scammers ripping off the government. People also get upset when the politicians they put in office rip off the public. In his second term, Trump has decided to use the White House as a platform for profit in a way that would previously have been unimaginable.

He created a crypto coin as an avenue for bribery, as did his wife. He also secured a huge movie contract for his wife, also an avenue for bribery. He has sold pardons to people convicted of just about every offense imaginable. He has steered government contracts to companies in which his kids have a stake. He has repeatedly engaged in insider trading, buying or selling shares in companies in advance of actions that will affect their price. And he even has decided to wholesale insider trading, selling advance access to his Truth Social posts that might move markets.

Past presidents have put all their assets in a blind trust where they don’t have direct knowledge of where they are invested. They have usually required their top aides to do the same. Under Trump, top aides are not expected to put their assets in a blind trust. In fact, some officials, like Commerce Secretary Howard Lutnick, have immediate family members (his sons) operating businesses that can directly benefit from their inside knowledge.

The new approach seems to have paid off quite well. According to Forbes (reprinted by Grok) Trump’s personal wealth has increased by roughly $2.5 billion since he took office. For his family as a whole, the gains have been around $5 billion. Forbes put the gains to Howard Lutnick’s family at $4.1 billion.

The Scorecard: Trumpian Corruption Swamps Minnesota Fraud

The numbers here are clearly somewhat speculative, but there can be little doubt that the money at stake with the Trump administration’s corruption swamps any fraud associated with government programs in Minnesota. (I didn’t even go through the rest of the cabinet and other top officials, virtually all of whom seem to be moonlighting with side ventures.) It is understandable that Republicans, pushing their racist tropes, would scream hysterically about fraud, some of which was done by Black immigrants. But why do liberals run and hide instead of fighting back with the real story?

We lost a promising politician and effective governor because of this failure. Even more importantly, if Democrats run and hide every time Republicans yell “Black people, fraud,” they will lose. Because Republicans always yell “Black people, fraud.” Winning elections will require effective ways to fight back.

This first appeared on Dean Baker’s Beat the Press blog.

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

Is the American Empire Going Broke—What Next?

By Jack Rasmus

October 20, 2026

Source: Originally published by Z. Feel free to share widely.

There is increasing public discussion today, in the US and globally, about the trajectory of the American Empire.

The discussion frequently cites the American Empire’s increasingly apparent unwinnable wars in Iran and Ukraine; the Empire’s failure to check the rise of China economically, politically and technologically; the challenge to American global economic hegemony by the BRICS; growing splits in the NATO alliance between Europe and the US; the fracturing of long term economic and political relations with historically closest ally Canada; and the Empire’s resort to aggressive military and economic action within the western hemisphere—to name but the more obvious.

A large part of the commentary pointing to these and other developments argues, correctly, they are signs of America’s imperial decline. Some extrapolate and hyperbolically argue—incorrectly—that the developments are signs of Empire collapse.

But ‘signs’ aren’t necessarily causal explanations of decline and certainly not of collapse. More often the ‘signs’ are symptoms of more fundamental, underlying causal forces responsible for the increasingly obvious trajectory of American imperial decline—while extrapolations concluding collapse are impressionistic and distorted by wishful thinking.

Empires do not decline because they lose wars, are abandoned by allies and client states, or are increasingly opposed by state challengers to their hegemony.

Empires decline because they can no longer afford the expanding costs of maintaining their hegemony: the accelerating costs of waging constant wars of expansion and/or containment, the demands of financing a bloated expanding military bureaucracy, the inability to afford or develop new generations of weaponry, the necessity of supporting weakened and increasingly economically dependent allies, the costs of bribing foreign elites to continue to accept Empire leadership and rules, and the inability to maintain dominance over global goods and money asset flows.

Empires are expensive to maintain and defend. That’s been true historically. It’s no less true of the American Empire today.

The costs of the American Empire have been rising steadily since 2001. They  accelerated after 2021, intensified further 2025-26 under the Trump regime. And promise to grow even faster the next two fiscal years, 2027-28.

But accelerating costs is only half of the problem of imperial finance. Empire costs can rise and even accelerate so long as revenues continue to rise sufficiently to fund Empire institutions, its military and geopolitical practices.

When revenues no longer rise proportionately to the rising costs—a Funding Gap necessarily arises. Insufficient revenue generation required in order to pay for the accelerating costs of Empire together create the Funding Gap.

And the American Empire today is experiencing a sharply expanding Funding Gap, as its costs accelerate faster than its ability to generate sufficient revenue to cover the accelerating costs.

In the 1990s decade there was no Funding gap. Rising expenses of Empire were financed by nearly 4% annual GDP growth and tax revenues from that growth. The transformation to a professional army, and the consequent reduction of 500,000 troops, also released significant cost savings. There was no resort to debt financing. In the latter three years of the decade the US actually ran a budget surplus. The decade represented the era of high ‘unipolarity’ of the American Empire.

The situation began to change after 2000. Costs of Empire accelerated as US neocons launched ‘forever wars’. Economic growth annually slowed by nearly half. Simultaneously, American imperial elites embarked on a massive tax cutting experiment that would eventually delete $20 trillion from the US Treasury over the next quarter century. A Funding Gap began to emerge, relatively slowly at first. And the Empire began resorting to debt financing of that gap.

The cost acceleration slowed in the first half of the second decade of the 21st century, as government finances in general were diverted to the economic bailout in the wake of the great recession and banking crash of 2008-09. By the end of that decade, however, Empire costs began to rise more rapidly once again. Economic growth recovered slowly and weakly, as did revenues from taxation which were further impacted negatively by Trump’s 2017 $4 trillion tax cuts.

Then came the Covid crash of 2020-21 and further bailouts even more costly than 2008-09. Overlaid on this was a renewed acceleration in Empire costs at the fastest rate yet, as wars in the Middle East, Ukraine, and military buildup for planned war in Taiwan accelerated defense spending once again.

The spending on war and defense accelerated further in 2025-26 as Trump launched no fewer than eight imperial offensives in 2025. The cost side of Empire promises to accelerate still further as Trump proposed to add hundreds of billions of dollars more to Pentagon and defense spending in 2027-28.

While the costs of Empire continued to accelerate out of control, the revenue side of Empire began experiencing severe problems as well.

Revenues to fund imperial activity may come from tax revenues from robust general economic growth. Or from debt sources as the Empire resorts to borrowing to cover its costs. Or some combination of revenues from both taxation and borrowing.

But as costs of Empire have accelerated in the 21st century, tax sources have struggled to fill the emerging cost acceleration. Despite a $10 trillion fiscal-monetary stimulus in 2020-22, economic growth only modestly rose above 2% annually after 2021. A Trump second $5 trillion tax cut mostly on capital incomes in 2025 exacerbated the pressure on tax revenues as a funding source. The consequence was an even greater resort to debt financing of the rising costs and Funding Gap. Annual budget deficits exceeded $2 trillion on average after 2021, driving the national debt from $29.6 trillion in 2021 to more than $40.1 trillion in 2026. That’s an average of more than $2 trillion rise in national debt per year.  The rise in deficits and debt in turn resulted in interest payments on the debt escalating from $562 billion in 2021 to $1.36 trillion in 2026. 

In other words, debt financing of the accelerating costs of Empire is fast approaching its limits—just as tepid economic growth and continued massive tax cutting further reduces tax revenues as a source of funding.

Debt financing occurs primarily via the federal US government sale of US Treasury securities annually to foreign and domestic US buyers. The former constitute 32% of total Treasury holdings; the latter the remaining 68%.

As costs of Empire accelerated rapidly in the past five years, debt financing was able to continue to fund the slack and cover the chronic multi-trillion annual deficits and national debt. However, events in 2026 indicate debt financing through Treasury sales may have entered a crisis period as well.

Treasuries sales managed to continue to rise after 2021 as costs of Empire accelerated—even as China and other foreign buyers of US Treasuries reduced their purchases.  China alone reduced its holdings of Treasuries from $1.2 trillion by half to $.6 trillion over the five year period.

The empire’s closest ally, Japan, continued to purchase Treasuries, however, maintaining more than $1 trillion in total Treasury holdings. Meanwhile, Empire European allies accelerated their Treasury purchasing. Many EU countries (and Canada) doubled their purchases of Treasuries from 2021 to 2025.

In short, the Empire’s closest ‘core’ allies largely funded the accelerating costs of Empire from 2021 through 2025. But this may be coming to an end in 2026, raising the specter the Empire can no long debt finance its runaway costs of Empire.

In 2026 Japan began shifting from buying more US Treasuries to buying more of its own government bonds—as what is called the Yen ‘carrying trade’ collapsed and US Treasury Dept. intervention failed to restore the carrying trade.  Simultaneously, the Empire’s European allies appear to have begun reducing their massive purchasing and holdings of US Treasuries—as their costs of funding their support for their Ukraine war required new bond issuance of $90 billion with a purported additional $177 billion in EU bond issuance to follow. In addition, Europe plans to fund a $1 trillion rise in European military production promises to add more to their bond debt load. With these developments, continued Europe (and Canada) buying of US Treasuries is highly unlikely—putting pressure on the Empire generating more Treasury sales from domestic US buyers.

The Trump administration has tried to supplement Treasury sales with Tariff revenues. In 2024 total US revenue from tariffs was $88 billion. This initially rose to $288 billion in 2025 due to Trump’s initial tariff wars. But US Supreme Court decisions in 2026 required the return of $145 billion of that $288 billion. Trump tariff policies have therefore failed as a significant new revenue generating source to offset the slowing and possibly even decline of debt revenue from Treasury sales to foreign buyers.

Foreign sales of Treasuries remain the primary source of funding of Empire costs, however. With purchases by China, Japan and Europe growing more uncertain, the Empire must sell even more Treasuries to domestic US buyers (banks, businesses, wealthy investors, etc.).

But that source of debt financing too may be confronting a separate set of concurrent problems of its own.

The bubble in the Artificial Intelligence financial markets has been ‘sucking up’ money capital in 2026 at an astounding rate. The big 7 tech companies alone project the need to raise $1 trillion in 2026 (and another $1 trillion in 2027) in order to fund investments in data centers, chips, AI agents, etc. The big Tech companies have largely committed their former mass of cash holdings and even resorted to raising equity (new stock) to generate additional revenues to invest in AI.

They have also begun borrowing at a level as never before. Some estimates are that $200-$300 billion is being borrowed from private capital sources to fund the AI boom. If so, that amount will likely ‘crowd out’ and discourage further private US domestic purchases of US Treasuries in 2026-27.

That development will further exacerbate the problem of debt financing of the Empire via Treasury sales, as costs of Empire continue to accelerate further under Trump, 2027-28.

In other words, just as the costs of Empire accelerated after 2021, rose faster in 2025-26 and are projected to accelerate still faster in 2027-28, the ability of the Empire to finance its rising costs from traditional Treasury sales (foreign and domestic) is becoming increasingly problematic!

The American Empire’s current Funding Gap is therefore likely to grow—as costs continue to accelerate and the primary (Treasury sales) and even secondary (tariff revenues) sources prove insufficient to keep up!

In this writer’s just released new book, ‘The Twilight of American Imperialism’, Clarity Press, September 2026, the data on costs of Empire and revenue sources—i.e. the Funding Gap of Empire—is provided in detail, with sources, for the period 1992 through 2026 (with projections beyond).

The following Table 5.1 is from Chapter Five, ‘The Crisis of Imperial Finance’, of the book. It summarizes the accelerating total costs of Empire since 2019.

Together, the trends in Empire costs vs. revenues reveal the American Empire’s Funding Gap is about to become unsustainable. The book further concludes, the Empire will subsequently have to cut costs by retreating to the western hemisphere and Central Pacific; or raise more revenue from taxation; or divert revenues from social programs to Empire expenditures. Or likely some combination of all the above.

Like Empires before it—from the Roman to the British—it is the crisis in imperial finance which is ultimately driving the decline of the American Empire. The military failures, failed regime change operations, fracturing geopolitical alliances and geoeconomic developments are but symptoms and ‘signs’ of Empire decline. The Empire’s deteriorating financial base, reflected in its growing Funding Gap, is the underlying fundamental driver and determinant of the decline of Empire now emerging.

TABLE 5.1[1] Total Defense Spending & Costs of Empire 2019-2026 ($bil)

[1] BEA.gov, GDP Table 1.1.5. Fred, https://St.louisfed.org/series/FDEFX.  Defense NIPA & Defense Fred estimates both assume for 2026 the same average annual rate of increase in spending equal to the prior average for the 3 years 2022-25, plus the $200 Hegseth request in spring 2026 for supplemental spending for Iran-Venezuela military actions and weapons replacement. DoD spending for 2027 is from Trump’s initial budget requests calling for a $400 billion Pentagon increase over baseline 2026, supplemented by $100B for OCO costs for continuing war in Ukraine and Iran in 2027. For Veterans and other categories for 2026 sources and calculation methods are as indicated in footnote for Tables 3.1 and 4.1 in prior chapters; that is spending enacted and authorized by Congress. Estimates for defense spending share of debt interest payments are based on assumption Fed rates on US Treasuries sales remain in 4% to 6% range.

Jack Rasmus

Dr. Jack Rasmus, Ph.D Political Economy, teaches economics at St. Mary’s College in California. He is the author and producer of the various nonfiction and fictional workers, including the books The Scourge of Neoliberalism: US Economic Policy From Reagan to Bush, Clarity Press, October 2019. Jack is the host of the weekly radio show, Alternative Visions, on the Progressive Radio Network, and a journalist writing on economic, political and labor issues for various magazines, including European Financial Review, World Financial Review, World Review of Political Economy, ‘Z‘ magazine, and others.