Fast Money

Here's why Trump's economic plan would spark a recession: Moody's Mark Zandi

Moody's red flag on Trump's economic policies
Moody's red flag on Trump's economic policies

If Donald Trump becomes president and implements his current economic plan, Moody's Analytics chief economist Mark Zandi said it would create dire consequences for the U.S. economy.

"The key thing is the very large budget deficits which would ensue under his plan," Zandi recently told CNBC's "Fast Money."

Zandi, a former economic advisor to 2008 republican presidential candidate John McCain, is the man behind a new report that suggested a Trump presidency would send the economy spiraling into a recession. He cites the "massive tax cuts" in Trump's plan as his plan's biggest problem.

"Only a small part of that is paid for so you get very large budget deficits and much higher government debt—on top of an economy that's already at full employment," Zandi explained. That "results in much higher interest rates which combined with a lot of other things undermines corporate earnings and ultimately stock prices."

Zandi, who's getting ready to release special analysis of Hillary Clinton's economic plan, believes a watered-down Trump measure is the likeliest scenario if he wins the race for the White House. Zandi added that a less aggressive economic plan would still negatively alter the current economy's state.

"I don't think the Congress, no matter what it (the plan) looks like, would actually pass what he has proposed," he said. "It's pretty clear that everyone would end up in a pretty bad place."

'Profound errors' with Zandi's approach

Mark Zandi
Adam Jeffery | CNBC

Moody's isn't the only one to find fault with Trump's tax plan. Just months ago, the nonpartisan Tax Foundation said the real estate mogul's tax and spending proposals were "unrealistic", and could explode the U.S.'s debt burden.

However, the Trump campaign took issue with Zandi's research, firing back with salvos of its own.

"The errors in Zandi's analysis are profound," Trump campaign senior policy advisor Stephen Miller wrote in a statement released to CNBC.

"Closing the trade gap with China would create millions of jobs, as would lowering taxes, unleashing energy production, streamling regulations, and ending the fiscal drain of open borders," Miller added.

Zandi, however, responded that his study is "error free."