You Won’t Like Trumponomics 2.0
By: The Editorial Board (Bloomberg. com)
S E E D E D C O N T E N T
Whoever wins November's election, inflation will present them with an immediate challenge. More than two years after the Federal Reserve started raising interest rates to alleviate a pandemic-era price spike, the so-called core consumer price index remains well above the central bank's target. It's a bit puzzling, then, that former President Donald Trump's economic agenda seems to be dedicated to raising prices.
What policies would a second Trump administration pursue? The former president hasn't been a model of clarity on the campaign trail, but some general themes have emerged.
Mind the Gap
Trump's stated agenda will make the Fed's job harder
Source: Bureau of Labor Statistics
Note: Excludes food and energy
Tariffs, one of Trump’s only consistent enthusiasms, are a sure thing. Starting in 2018, his administration imposed several rounds of duties, prompting predictable retaliation. Combined, these measures eliminated jobs , slashed incomes and cost consumers about $51 billion annually . Now Trump wants to impose tariffs of 60% on Chinese-made products and 10% on other imports. Bloomberg Economics estimates that this would raise consumer prices by 2.5% over two years and reduce growth by 0.5%. Trump has also promised a 100% duty on imported cars. Details TBD — one analyst describes the likely effect as “ catastrophic ” — but the point is that trade wars of this kind are always prone to raising prices.
Trump’s plans for monetary policy pose a similar risk. According to media reports , his advisers are laying the groundwork for the president to weigh in directly on interest-rate decisions. (His campaign has vaguely disputed these reports.) The rationale for central-bank independence — among the most successful policy innovations of the post-war era — is that politicized monetary policy will tend to have a pro-inflationary bias . In this case, a self-fulfilling prophecy is likely: Consumers and businesses, expecting the Fed to tolerate higher inflation under Trump, will behave in ways that (once again) boost prices.
More directly, the former president is toying with devaluing the dollar . Although the hope is to revive domestic manufacturing, exactly how he’d carry out this plan isn’t clear. (Like many products of Trump World, it seems to be premised on a lot of needless belligerence.) On balance, such manipulation is likely to invite retaliation, erode faith in the dollar and do little to actually boost exports. By raising the cost of imported goods and inputs for domestic producers, it would also (perhaps you’ve sensed a pattern) increase prices.
No Time for Tax Cuts
The federal debt ratio is already headed toward all-time highs
Source: Congressional Budget Office
Trump’s tax plans, finally, would tend in the same direction. He says he’ll extend the expiring provisions of the Tax Cuts and Jobs Act of 2017 and has at times mused about a further reduction in the corporate rate, to 15% from 21%. Recall that the drafters of the law tied themselves in knots to avoid acknowledging its true costs (hence the expirations). Extending it in full would cost about $3.8 trillion by 2033 . A 15% corporate rate would cost perhaps a half-trillion more. Trump’s plans for further tax cuts — “I’ll give you a Trump middle class, upper class, lower class, business class big tax cut,” he said at a rally on Saturday — remain rather nebulous, but fiscal discipline does not sound like the governing priority. It’s safe to say (at risk of repetition) that these policies, too, will contribute to higher prices.
Some caveats are in order. Trump doesn’t always mean what he says. He rarely gets what he wants from subordinates. Many of these policies may never come into effect, or may be partly neutralized by the Fed if they do. But what do you get, all else equal, when you add much higher tariffs, a politicized central bank, a deliberately weakened currency and an enormous surge in public borrowing, at a time of already-elevated inflation?
It would be best to not find out.
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This Bloomberg editorial presents a sobering view of what Trump's economic plans will really mean.
I'm not worried. there's not enough delusional and paranoid maga sycophants to vote for a future narcissistic jailbird that is already showing early signs of dementia in his daily rants in court and online. the stress of sitting anywhere he can't speak or control the conversation will eventually make him blow a gasket, and at his age, in his current state of health, time is on the side of the people that believe in the constitution and rule of law. his only function now is to draw out the unamerican suckers in congress.
I have been doing my part to help out the economy by buying expensive shit that I can't afford and have no need for. (Can I interest anybody in a lightly used Rolex?)
Thanks for the assist, any idea how much you’ve lowered inflation by?
Every tiny bit helps. Just trying to help my fellow consumers.
Going belly up on a new Vette should be my next sacrifice.
Didn't the Biden administration just raise tariffs?
Has it never been before?
Absolutely, a historic rise in inflation does that.....
Wonder why?...
Well, best buckle up cause the cake is already in the oven.
The surge in inflation began as a result of the pandemic. Fears of recession drove the Trump administration to pour trillions of borrowed dollars, Trump's "stimulus", into the economy. Under Biden, Treasury Secretary Yellin admitted she underestimated the extent and duration of the on-going inflation, but fortunately wages are outpacing inflation.
Really?.. Do you have anything to back that up?
Right, had nothing to do with anything that Biden did...
Yes and no.
Biden’s overspending and borrowing has supercharged inflation. [✘]
This I think is a huge deal as well. Unless Republicans keep the House in November as well as gaining enough seats in the Senate to hold 60+ seats as well as Trump winning the Oval Office, I don't think the tax cut will be extended. And IMO taxes do need to go up some as well as some serious cuts are needed. They need to find a way to reduce mandatory spending, can't do all the fixing with discretionary spending alone. This is gonna hurt a lot of people for quite a while but I just don't see any other way to get ahead. The debt under the past 4 presidents (including Biden) has risen more than any other president, we cannot just keep borrowing money.
The next president, whoever wins the White House in November, has some tough issues to face.
What mandatory spending do you suggest should be reduced, or do you favor across the board reductions?
This is good stuff…
Tariffs, one of Trump’s only consistent enthusiasms, are a sure thin
[ ✘ ] Biden literally just increased tarrifs
e direction. He says he’ll extend the expiring provisions of the Tax Cuts and Jobs Act of 2017
so the solution to inflation is raising taxes on low earners and making the tax code more regressive. Can’t wait for Biden to campaign on that.
the panic is setting in among the geniuses who promised that inflation was temporary and thought they could take credit for beating it by passing an “inflation reduction act” that ignored the problem except for, [ ✘ ] making it worse through even more borrowing.
The next person who tells me that trmp was good for the economy I will repeat this sentence I copied and pasted.
Isn’t it so obvious the deep thought that Trump puts into his economic policy thoughts? What?! Biden increased tariffs on Chinese electric car imports by 100%?! Then I will do it by 200%!!
when it comes to the US economy, trump only cares about himself and maga aristocracy. he doesn't give a shit about the maga morons that buy and wear his merchandise and pay his legal bills. his first and only thought is always "what's in it for me"...
[✘]