Posted on 07/17/2024 11:51:06 AM PDT by SeekAndFind
It might not reach the epic level of the 1975 “Thrilla in Manila” heavyweight boxing contest between Muhammad Ali and Joe Frazier, but the rematch is now official: Joe Biden, the president, against former president Donald Trump in November.
And with that, the stark contrast between two opposing economic philosophies: the government-as-agent approach of Biden that has prevailed for the past three years and the populist, laissez faire, deregulatory ethos that comprised the Trump economic agenda from 2017 until COVID-19 intervened.
Biden’s successes and failures are well known by now: the strong performance of the labor market, the better-than-expected economic growth and the massive investments in such areas as semiconductor manufacturing and electric vehicles. But also, the huge fiscal stimulus that some economists blame for the inflation that took off in late 2021 and is only now receding back to pre-pandemic levels. Overall, the Biden economic plan draws less than favorable reviews from voters.
For Trump, the question is what lessons has the former president learned and whether a second Trump term would bring more of the same or some pivot to a new direction.
In a wide-ranging interview with CNBC on Monday, Trump gave a preview of what Americans might expect if he gets the keys to the White House again. Import tariffs, a feature of Trump 1.0, will be back with a vengeance. So, too, are promises of more tax cuts and a sharp curtailment of immigration. There’s also discussion of cutting entitlements, though he has made conflicting statements on that issue.
Import Tariffs
“I’m a big believer in tariffs for two reasons,” Trump told the hosts of the “Squawk Box” morning market show. “Number one, I fully believe in them economically when you’re being taken advantage of by other countries. For instance, China was taking advantage of us on the steel. … They were destroying our entire steel industry, which was never doing very well over 25 years anyway but – you know, because it’s been eaten alive by foreign competition, and they were dumping steel.”
Trump has floated the idea of targeted tariffs as well as an overall import duty of 10% on all goods coming into the country. A lot depends on the details, and they would probably require congressional approval. But even though Trump repeatedly claims that China paid the costs of his earlier tariffs, economists across the spectrum generally consider tariffs to be a tax on Americans – and some say they lead to higher inflation.
“Such a tariff, and likely retaliatory tariffs from other countries, would increase the price of imported goods,” says Patrick Horan, research fellow at the Mercatus Center at George Mason University. “It’s not clear how much this proposed tariff would affect the inflation rate. A bigger concern is that such a steep tariff and ensuing trade war would harm both American producers and consumers.”
Still, Trump continues to tout their value, sounding at times in the CNBC interview like Tony Soprano.
“And frankly, I made them sing. I made other countries sing with the threat of tariffs,” he said.
Patrick Kilbane, general counsel and wealth advisor at Ullmann Wealth Partners Group, says that Trump “says a lot of things and he follows through on a lot of things – and he also doesn’t follow through on a lot of things.”
Kilbane also says that Trump will find Congress is not always going to agree with his policies, even within the Republican Party.
“Trump had all three, the Senate, the House and the White House” early on in his presidency, yet “even members of his own party voted down repeal of the Affordable Care Act.”
George Calhoun, director of the Quantitative Finance Program at Stevens Institute of Technology, says Trump’s tariffs and other moves already underway in Congress such as the House’s vote this week against TikTok, are “part of the U-turn on China.”
“Sentiment about China has soured so dramatically in the past five years” and is shared by both parties, Calhoun adds.
Immigration Crackdown
The Republican Party has made a cause celebre out of immigration and Trump is no exception. At times during his campaign, he has threatened mass deportations and “ideological screening” of migrants who he has described as “poisoning the blood of our country.”
Such a crackdown could exacerbate what is already a tight labor market as Americans continue to retire at record levels and the birth rate is not sufficient to match the demand for new workers.
“While the federal judiciary – or a Democratic Senate – could conceivably limit his policy options, there is very little chance that immigration will increase from today’s historic levels over the next four years,” Matt Gertken, chief strategist at BCA Research, wrote in a recent analysis of a potential second Trump term. “Labor force growth will slow.”
Alex Nowrasteh, director of immigration studies at the free-market CATO Institute, studied many of the arguments made against immigrants and found many of them lacking.
“Immigrants are typically attracted to growing regions,” he wrote, “and they increase the supply and demand side of the economy once they are there. They expand employment opportunities for everybody.”
Michael Clemens, a nonresident senior fellow at the Peterson Institute for International Economics recently commented on Trump’s proposal.
“The immigrants being targeted for removal are the lifeblood of several parts of the US economy,” he wrote in a post on the institute’s website. “Their deportation will instead prompt US business owners to cut back or start fewer new businesses, in some cases shifting their investments to less labor-intensive technologies and industries, while scaling back production to reflect the loss of consumers for their goods.”
Citing previous research by an economics team at the University of Colorado, Clemens noted that for every 1 million immigrant workers deported from the U.S., 88,000 native U.S. workers lose their jobs.
The Federal Reserve
In his first term, Trump picked on Federal Reserve Chairman Jerome Powell, an Obama appointee, as governor. He was then made chairman by Trump and reappointed by Biden. Trump was upset in 2019 that Powell was not doing enough to lower interest rates and stimulate the economy.
He famously asked whether Powell or Chinese President Xi Jinping was the “bigger enemy” of America. In February, Trump told Fox Business News host Maria Bartiromo he would not reappoint Powell if he wins the White House again.
Although the Fed is avowedly nonpolitical, some fear that Trump might choose a friend or political associate to the powerful post of chairman should a vacancy occur. Former Treasury Secretary Steve Mnuchin, one of the Trump Cabinet members who served the former president and kept his reputation intact, is a very successful investor.
Tax Cut Fever
Cutting taxes, especially on corporations and high-income individuals, has long been a staple of Republican economic policy. In 2017, Trump won a $1.7 trillion tax cut from Congress. While economists often argue about whether tax cuts are beneficial to the economy, there is little argument that they add to the nation’s debt if they are not offset with other cuts or revenue enhancements.
The Trump tax cuts are set to expire in 2025, giving a second Trump administration the opportunity to fight that battle again. Once granted, tax cuts are often difficult to take away, and much will depend on who controls the Senate and House. Biden, by contrast, continues to propose raising taxes on the wealthy.
At the heart of the debate will be the corporate tax rate. The rate was lowered to 21% from 35% a part of the 2017 tax cut package. Trump has said he would like to see it maintained at that level, while Biden has proposed raising it to 28%.
In a comprehensive report issued this week, Allianz Research found that the combination of proposals Trump has issued so far would hurt consumers and potentially unnerve financial markets. Much depends on exactly how those policies are implemented, it noted.
“A Trump 2.0 presidency would inherit very large fiscal deficits from the Biden Administration, rising interest expenses and an economy probably more prone to bouts of inflation,” the report said. “Another round of large, deficit-financed tax cuts (or increased spending) could thus reignite inflation and heighten concerns about the sustainability of U.S. public finances in bond markets.”
Maxime Darmet, senior economist for the U.S. and France at Allianz Trade, says “Trump is a guy who likes to bargain to get deals,” adding, “We don’t think he would do too crazy things.”
One guardrail Darmet sees is the increasing power of the conservative wing of the Republican Party in Congress and its aversion to increased government spending and deficits. He believes Trump may use reversals of some of Biden’s policies in support of green energy and high-tech manufacturing to finance his own industrial policy, which Darmet says would be broader and less targeted than those employed by Biden.
“Even more than Biden, he would unleash industrial subsidies on a whole set of sectors. Pretty much everyone would get a little bit of money,” he says.
But the economic environment has changed so much since he took office in 2017 – notably interest rates that are four to five times higher.
“There are a lot of constraints now,” he says. But, if enacted, “we think his policies might be more inflationary.”
One plausible outcome of the election could be a president of one party, Biden or Trump, and a split Congress. Divisions within the GOP could also present a problem, as former Speaker Kevin McCarthy found out when he tried to make deals with Democrats to keep the government running.
“History has shown our government works best when it’s divided,” Kilbane says.
According to the interview, if Trump wins, he will...
* Enforce huge bilateral sanctions even though he claims “I don’t love sanctions,” he says. He keeps circling back to William McKinley, who he says raised enough revenue through tariffs during his turn-of-the-20th-century presidency to avoid instituting a federal income tax yet never got the appropriate credit.
* Allow Jerome Powell to serve out his term as chair of the Federal Reserve, which runs through May 2026
* Will lower the corporate tax rate to as low as 15%
* No longer plans to ban TikTok.
* Considers Jamie Dimon to serve as secretary of the Department of the Treasury
* Ambivalent (if not outright hostile) to the idea of protecting Taiwan from Chinese aggression and to US efforts to punish Putin for invading Ukraine.
Sounds good to me.
You took the words right out of my mouth... or fingers... or whatever.
It worked damn well last time.
I think some of those points are misdirection by Trump. He knows you don’t show your cards to the enemy.
To the foreign countries that own our Senate, Import Tariffs and Restrictions on Immigration are not desirable policies. .
I immediately noted that some of the US News & World article seemed in direct conflict with the Bloomberg Newsweek interview that came out last night. Specifically the Powell reappointment discussion.
Sounds good to me but this part of the article is laughable if it were not so slanted or just a lie: “the strong performance of the labor market, the better-than-expected economic growth and the massive investments in such areas as semiconductor manufacturing and electric vehicles.”
The last point is framed incorrectly. DJT is first and foremost a master negotiator and with the leverage of the strength of the US behind him can be effective and persuasive. Even Trump critic Zelensky understands this, as he’s signaled cooperation with a Trump presidency, as do most world leaders.
I get the feeling there won’t be much crackdown on Indian H1-B fraud.
NOT 1% of 1% OF THE INVADING OUTSIDERS ARE USEFUL IN ANY “LABOR FORCE”.
SINCE TRUMP’S LAST TURN AT THE WHEEL:
The FEDERAL RESERVE IS UNDERWATER..
It went into LOSS position on 9-28-2022 & by 6-19-2024, it was DOWN-—LOSSES—of $176 BILLION.
CAN ANYONE EXPLAIN???
HOW-—WHY should the FED RESERVE be LOSING MONEY-—
Especially so much in only 21 months.
www.freerepublic.com/focus/f-news/4247038/posts
"the strong performance of the labor market"
Half or more of all jobs created (or restored) are part time, and the lion's share of jobs have gone to the foreign-born, not Americans.
"the better-than-expected economic growth"
Bloated by counting deficit spending as GDP.
"the massive investments in such areas as semiconductor manufacturing and electric vehicles."
Most of which hasn't produced anything, like the billions earmarked for charging stations that resulted in only a handful of chargers being installed. How much money has just disappeared in graft in unclear.
regular people don’t understand that tariffs are used in the war against other big economies that are trying to destroy our manufacturing base by under cutting the actual honestly priced goods that are being priced below actual production cost, liken it to always trying to by stolen half priced goods destroying the business and providers just trying to stay above water. China doesn’t care about profits just power and control. tariffs level the playing field.
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