Tag Archives: Trump economic policy

Prologue to a Diary of the Second Addams Administration 8.

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Then there’s the money-bags people.  Trump has promised an economic policy based on cutting taxes, cutting regulations, increasing domestic energy production, and imposing high tariffs on all and sundry.  He has said that he will do all this without unleashing a new round of inflation or causing interest rates to rise.  That’s not an easy combination to make.  Trump has nominated Scott Bessent for Secretary of the Treasury.[1]  He’s a billionaire hedge-fund manager.  So Wall Street is greatly relieved.  They see him as the adult in the room.[2]

Bessent appears to be a late-adapter of tariffs.  Sort of the threshold cost of entry for an econ job with the Addams administration.  The Trump-Biden tariff war against China has had an effect.  By 2023, imports from China had fallen to 14 percent of total imports.  That is the lowest level in almost twenty years.  Conversely, imports from Mexico[3] rose to 15.4 percent and imports from Canada hit 13.6 percent of the total.[4]  Yet Trump has been threatening high tariffs on Mexican and Canadian imports.  These will push up consumer prices, complicating Bessent’s job.  Bessent is said to hope that the mere threat of more tariffs will compel foreign countries to adjust their policies to America’s advantage. 

Bessent is going to have some competition for the control of economic policy.  For one thing, Howard Lutnick wanted that job, but had to settle for Secretary of Commerce.  That still gives him a voice in economic policy.  He may—or may not—resent Bessent getting the job.  People don’t climb to the heights of Wall Street without having sharp elbows. 

Then Russell Vought, head of the Office of Management and Budget (OMB) in the first Addams administration, got a second bite at the apple.  Trump has described him as “an aggressive cost cutter and deregulator.”  Media critics agreed, reporting that Vought had called for cutting $2 trillion from Medicaid, and $400 billion from food stamps.  Elon Musk and Vivek Ramaswamy are going to be running a non-governmental, purely advisory “Department of Government Efficiency” (DOGE).[5]  It looks like OMB will be the place where the recommendations go for implementation. 

Another tool in the kit for the administration may be “impoundment.”[6]  This idea arose during the Nixon administration.  Basically, just because the Legislative Branch appropriates money for some purpose doesn’t mean that the Executive Branch has to spend it.  In 1974, Congress passed a law saying the President couldn’t “impound” funds.  Trump says the law is unconstitutional.  He may have the Supreme Court to back him up. 

            Finally, Trump nominated Congresswoman Lori Chavez-DeRemer to lead the Department of Labor.  She’s pro-union and Teamsters President Sean O’Brien had recommended her for the slot.  He nomination alarmed the Wall Street Journal, perhaps because it suggested that Trump’s support for the working-class voter isn’t purely rhetorical.  Better that the administration should “spur economic growth and a robust job market” in hopes that some of the money will reach workers. 

[1] “Treasury: Bessent choice reassures Wall Street,” The Week, 6 December 2024, p. 32. 

[2] See: H.R. McMaster, John Bolton, Bill Barr, etc., etc. 

[3] Possibly from China by way of Mexico. 

[4] “The bottom line,” The Week, 6 December 2024, p. 32. 

[5] At least until Musk quits in disgust or he runs off Ramaswamy because Musk doesn’t play well with others. 

[6] “What next?” The Week, 6 December 2024, p. 4. 

Fact Check 2.

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            The Biden administration’s Inflation Reduction Act (2022) includes tax rebates and other subsidies to encourage “clean energy” industries in the United States.  These include wind and solar power, and the battery industry.  The spending stretches over ten years and amounts to $370 billion.  The IRA also includes “Made-In-America” provisions that are intended to reverse the long-running “off-shoring” of dull, dreary, and occasionally dangerous manufacturing jobs to low-wage foreign countries.[1]  In particular, the IRA targets China, pushing American companies to move production either to home or to other foreign trading partners.[2]  One possible brake on the IRA’s effectiveness lies in China’s possession of the sources of some minerals that are critical for the transition to renewable energy.[3] 

            Social Security and Medicare face long-term problems with their financing.  Social Security payments come from a federal tax on payrolls.  For many years, workers paid in more than was paid out to beneficiaries.  This created a surplus that has been held in the Social  Security “trust fund.”  More recently, as “Baby Boomers” have shifted from labor force to the uneasy leisure force, more money has been paid out to beneficiaries than has been paid in by workers.  As a result, the “trust fund” is being depleted.  Medicare is financed in a similar way and confronts a similar problem.  The Medicare trust fund is predicted to be exhausted in 2031 and the Social Security trust fund in 2033.  After the trust funds are exhausted, the government will be able to pay beneficiaries only what comes in from current payroll taxes.  This will lead to a reduction in payments.  Payments would be reduced by about one-quarter.[4]  Unless,…

            Various Republicans—individuals and groups—have proposed “solutions.”[5]  One is simply to raise the retirement age to 70.[6]  Two to four more years of paying into the systems at their peak earning phase of life plus two to four years less of drawing benefits could help balance the books.  Others, including Ron DeSantis and Nikki Haley, have proposed creating a two-tiered system.  People over 40 would continue to receive their current deal, while those under 40 would face a higher retirement age and—probably—a different financing scheme. 

            How do the Trump and Biden administrations match up on economic issues when the first three years of each are compared?[7]  Biden (3.7 percent) Trump (3.6 percent) had about the same unemployment rate.  Biden had more manufacturing jobs created than did Trump (791K v. 419K).  Biden had a higher GDP growth than did Trump (3.4 percent v. 2.7 percent).  Trump had a better experience with inflation than did Biden (2.1 percent v. 5.7 percent).  Trump had a better experience with wage growth than did Biden (+ 3.0 percent v. -2.7 percent). 

[1] See: Offshoring – Wikipedia  If successful, the IRA will have lots of American workers once again missing fingers or toes and hacking up colored phlegm. 

[2] Which it what China continues to be. 

[3] Lisa Friedman, “Republican Debate Fact Check,” NYT, 29 September 2023. 

[4] Angelo Fichera, “Candidates Sparring Over Social Security and Medicare,” NYT, 8 January 2024. 

[5] Fichera, “Candidates Sparring.” 

[6] Some of the guys in my morning work-out group have blue-collar jobs.  At least three of them have suffered bad, on-the-job concussions.  Another had a finger-tip pinched off by a piece of machinery.  One of the ladies who rings up my groceries always has on a large hand and wrist brace.  It seems indecent that people who can work into their Seventies or even Eighties because they have staffs to do much of both their work and their family responsibilities should suggest that people unlike themselves just buckle down.  What do I mean, “seems”? 

[7] Jim Tankersley and Lazaro Gamio, “Which President Can Claim These Economic Wins?” NYT, 8 March 2024.