According to Treasury Secretary Scott Bessent, Santa Claus will continue delivering bundles of joy in the new year to U.S. taxpayers, who will receive whopping tax refunds during 2026’s first half. Some $100 billion will flow from a retroactive tax cut contained in the “One Big Beautiful Bill Act” passed in July. And there are some special gifts for corporate America still waiting in Santa’s sled as well. Along with cash for consumers, the legislation brings large reductions in corporate taxes.

Some think the fiscal effects of all this will be large enough to add half a point to America’s GDP growth in the first quarter of 2026. But then there’s another, more ominous, possibility: a new surge of inflation. The price of gold, long understood to be the investor’s refuge against a deteriorating dollar, is sounding an alarm. It has soared from $2,400 an ounce in January 2025 to $4,400 in December.

Will this time be different? There’s a lot to consider.

If the story sounds familiar, it’s because not long ago — when President Joe Biden was doling out generous piles of emergency funds to taxpayers — the price of gold reacted mildly, and inflation shot through the roof a couple of years later. Now, it seems, investors may be on higher alert.

Of course, there’s more to consider. First and perhaps foremost, the Biden administration was dealing with an economy suffering from a pandemic shutdown. The U.S. Treasury and Federal Reserve Board were in cahoots. Unheard of quantitative easing had been introduced in an effort to curtail financial panics and protect the U.S. banking system. The Fed was directly purchasing new Treasury debt to the tune of $3.5 trillion; together, they were printing money to cover costs.

Obviously, some circumstances have changed. In December, the United States had $36 trillion in public debt on the books and holding. Because of President Donald Trump’s efforts to gain tariff-fueled revenues and reduce the scope and pace of public-sector spending, the nation has just reached an operating point where we are spending less than we take in. According to the Bipartisan Policy Center, the federal government’s cumulative deficit for fiscal year 2026 through November was $439 billion — 19% lower than the same time the previous year. Revenues increased by 18% and outlays increased by 1% from fiscal year 2025.

This may not last, but it at least offers the prospect of less debt and therefore less need to print money and fuel more inflation.

If so, why the runaway price of gold? We must remember that gold is ultimately money, a store of value universally accepted to extinguish debt. It’s also the ultimate disaster hedge. When economies and life itself become disrupted, as in the Middle East, Ukraine, Nigeria and Venezuela, people convert assets to gold as they reorganize. There is also a sizable and growing industrial demand for gold to be used in the production of computers and other electronic devices. Taken together, these rising demand forces are pushing the price of gold higher.

So, will the soon-to-be received fresh bundles of cash be vaporized by inflation? Or will inflation’s forces be cowed by America’s reduced need for printed money?

For the next couple of years, at least, I am betting against surging inflation. But looking farther out and considering that America has yet to definitively get its fiscal house in order, I fear that the printing press will again become a policy tool and inflation will continue to be a constant threat against prosperity.

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— Bruce Yandle is a distinguished senior fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences, a former executive director of the Federal Trade Commission, and a former senior economist on the President’s Council on Wage and Price Stability.

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