Trump and the Seemingly Faltering Economy

Donald Trump likes to claim he is responsible for the United States' economy and boasts about the stock market. The truth is that he merely inherited a growing economy from the Obama administration and that to date, his regime has done little to provide a basis for claiming responsibility for the economy which has grown, yet since much of the benefit go to the top 1% percent of taxpayers (especially due to the Trump/GOP tax break give away).  Now, with signs that the economy may be on the verge of faltering, Trump economic and trade policies may be a driving force towards a slow down and recession in 2020 - a recession (f not depression) already slamming American farmers thanks to Der Trumpenführer's tariffs and trade wars.  A column in the New York Times suggests that Trump's policies are a flop and, worse yet, his regime has no plan on how to deal with an economic slow down other than to blame "fake news" and the Federal Reserve.  Here are highlights:

Last year, after an earlier stock market swoon brought on by headlines about the U.S.-China trade conflict, I laid out three rules for thinking about such events. First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.

But maybe I should add a fourth rule: The bond market sorta kinda is the economy.

An old economists’ joke says that the stock market predicted nine of the last five recessions. Well, an “inverted yield curve” — when interest rates on short-term bonds are higher than on long-term bonds — predicted six of the last six recessions. And a plunge in long-term yields, which are now less than half what they were last fall, has inverted the yield curve once again, with the short-versus-long spread down to roughly where it was in early 2007, on the eve of a disastrous financial crisis and the worst recession since the 1930s.

[T]he bond market is telling us that the smart money has become very gloomy about the economy’s prospects. Why? The Federal Reserve basically controls short-term rates, but not long-term rates; low long-term yields mean that investors expect a weak economy, which will force the Fed into repeated rate cuts.

So what accounts for this wave of gloom? Much though not all of it is a vote of no confidence in Donald Trump’s economic policies.

[L]ast year, after a couple of quarters of good economic news, Trump officials were boasting that the 2017 tax cut had laid the foundation for many years of high economic growth. Since then, however, the data have pretty much confirmed what critics had been saying all along. Yes, the tax cut gave the economy a boost — a “sugar high.” Running trillion-dollar deficits will do that. But the boost was temporary. In particular, the promised boom in business investment never materialized.

At the same time, it has become increasingly clear that Trump’s belligerence about foreign trade isn’t a pose; it reflects real conviction. Protectionism seems to be up there with racism as part of the essential Trump. And the realization that he really is a Tariff Man is having a serious dampening effect on business spending, partly because nobody knows just how far he’ll go. [T]hink of the dilemma facing many U.S. manufacturers. Some of them rely heavily on imported parts; they’re not going to invest in the face of actual or threatened tariffs on those imports. Others could potentially compete with imported goods if assured that those imports would face heavy tariffs; but they don’t know whether those tariffs are actually coming, or will endure. So everyone is sitting on piles of cash, waiting to see what an erratic president will do. Of course, Trump isn’t the only problem here. Other countries have their own troubles — a European recession and a Chinese slowdown look quite likely — and some of these troubles are spilling back to the United States. But even if Trump and company aren’t the source of all of our economic difficulties, you still want some assurance that they’ll deal effectively with problems as they arise. . . . reportedly, is that there is no policy discussion at all, which isn’t surprising when you bear in mind the fact that basically everyone who knows anything about economics left the Trump administration months or years ago.

[T]the administration’s only plan if things go wrong seems to be to blame the Fed, whose chairman was selected by … Donald Trump. To be fair, it’s now clear that the Fed was wrong to raise short-term rates last year.

But it’s important to realize that the Fed’s mistake was, essentially, that it placed too much faith in Trumpist economic policies. . . . the Trump boom wasn’t supposed to be so fragile that a small rise in rates would ruin it.

I might add that blaming the Fed looks to me like a dubious political strategy. How many voters even know what the Fed is or what it does?

Investors were clearly far too optimistic last fall, but they may be too pessimistic now.  But pessimistic they are. The bond market, which is the best indicator we have, is declaring that Trumponomics was a flop.

Will Trump Tariff/Trade War Harm Republicans in Midterms?

The delusional narcissist in the White House likes to "win" and "punch back" but many Republicans believe that his threatened tariffs and a possible trade war will leave them being the ones against whom the punches is landed.  Especially in the 2018 midterm elections.  Tariffs will likely raise cost for American manufacturers and consumers and, at least in the case of consumers, wipe out or exceed the meager benefits - if any - realized from the GOP/Trump tax cuts.  Most impacted may be some of the states where Republicans are most vulnerable.  Trump's base may be thrilled by their "dear leader" attacking foreign business interest but failed to see - as is almost always the case with GOP policies - that they will be the ones picking up the costs through lost jobs or rising prices.  A piece in Politico looks at Republican fears and the intra-party rancor Trump is fueling.  Here are excerpts:

Donald Trump’s threatened trade war has opened a rift within the Republican Party that some lawmakers and strategists believe could undermine their effort to keep their majorities in Congress.

Republicans plan to brag about the economy in midterm campaigns in hopes of countering Trump’s unpopularity, touting a strong stock market, low unemployment rate and — most importantly — their increasingly popular tax legislation. But Trump’s suggestion Saturday that he might slap penalties on European cars, in addition to the tariffs on aluminum and steel he already promised, could upend that strategy completely, Republicans say.

"American manufacturers, businesses and consumers would be forced to bear the brunt, paying more for steel and steel products,” said Senate Finance Chairman Orrin Hatch (R-Utah), . . . . “Such action could very well undercut the benefits of the pro-growth tax reform we fought to get on the books.”

“It’s a real simple frame for the [midterm] election: Republicans want to run on issues,” said Douglas Holtz-Eakin, president of the American Action Forum and a former Congressional Budget Office director. “This threatens that because it … goes against our economic message.”

While narrow action directed at China alone might be well received, two top Republican congressional campaign sources said any broader trade actions — such as what Trump is floating now — could be devastating.

The back and forth comes just days after Trump said he would slap a 25 percent tariff on imported steel and 10 percent on imported aluminum as soon as this week. Trump tweeted Friday that “trade wars are good” and “easy to win.” And by Saturday, Trump doubled down by threatening to retaliate against countries seeking to punish the U.S. for its protectionism.

Most of the party flat-out disagrees. Sen. Mike Lee (R-Utah) called Trump’s proposed tariffs a "huge job-killing tax hike.” Sen. Ben Sasse (R-Neb.) said it will “kill American jobs.” And even Trump allies Larry Kudlow, Arthur Laffer and Stephen Moore argued in a Saturday CNBC op-ed that “even if tariffs save every one of the 140,000 or so steel jobs in America, it puts at risk 5 million manufacturing and related jobs in industries that use steel.”

Republicans have seen “this movie before, and they know it ends poorly,” said Holtz-Eakin, who worked in the George W. Bush administration. “I was at the White House for steel tariffs, and in the end, there was a lot of retaliation against the U.S.”

[A] trade war, Republicans say, would complicate their central pitch to voters that the GOP is good for business and Democrats will tank the economy.

Already, the EU has suggested it could retaliate against orange growers in the swing state of Florida, motorcycle maker Harley-Davidson in Wisconsin and other industries that could hurt toss-up areas that Republicans need to win if they're going to keep the House and Senate.

Sen. Lindsey Graham (R-S.C.), appearing Sunday on CBS’ “Face the Nation,” listed several South Carolina industries that he said would suffer, including tire and car manufacturers. And he directed his message to Trump personally: “You’re letting China off the hook and punishing the American consumer and our allies. You're making a huge mistake here.”

“Just a terrible decision, advocated by Assistant to the President for Losing Elections Peter Navarro,” tweeted conservative commentator Hugh Hewitt.

Republicans know they’re powerless to stop Trump. While they’re relatively accustomed to a president whose views don’t always align with their own, they don’t usually panic because they can simply refuse to pass legislation to make most significant policy changes. On trade, however, Trump can do as he pleases — sans Congress.

“When it comes to trade, that’s an executive power. There’s very little we can do,” said a senior Republican aide who is alarmed at the Trump administration’s trade policy.

The GOP Fraternity of Failure

I have often noted that one of the consequences of not knowing accurate history is that mankind - or in this case, America - is doomed to repeat past mistakes.  An example?  No one was successful in subduing Afghanistan since the time of Alexander the Great, not the British, not the Russians, or, as time has shown, America.  Invading Iraq with no concern for the region's history and artificial creation following World War I only exacerbated the disaster.  Republicans, however, rather than knowing and remembering accurate history prefer to rewrite the inconvenient parts and/or seemingly suffer from amnesia.  Jeb Bush's incredibly insane remark of invading Iraq is a case in point.  But it is only one of a long list of issues on which the GOP refuses to face reality and what history teaches.  A column in the New York Times looks at this problem that plagues all of the GOP presidential contenders, but Jebbie worse of all.  Here are highlights:

Jeb Bush wants to stop talking about past controversies. And you can see why. He has a lot to stop talking about. But let’s not honor his wish. You can learn a lot by studying recent history, and you can learn even more by watching how politicians respond to that history.

The big “Let’s move on” story of the past few days involved Mr. Bush’s response when asked in an interview whether, knowing what he knows now, he would have supported the 2003 invasion of Iraq. He answered that yes, he would. No W.M.D.? No stability after all the lives and money expended? No problem.

Then he tried to walk it back. He “interpreted the question wrong,” and isn’t interested in engaging “hypotheticals.” Anyway, “going back in time” is a “disservice” to those who served in the war.

Take a moment to savor the cowardice and vileness of that last remark. And, no, that’s not hyperbole. Mr. Bush is trying to hide behind the troops, pretending that any criticism of political leaders — especially, of course, his brother, the commander in chief — is an attack on the courage and patriotism of those who paid the price for their superiors’ mistakes. That’s sinking very low, and it tells us a lot more about the candidate’s character than any number of up-close-and-personal interviews.

Wait, there’s more: Incredibly, Mr. Bush resorted to the old passive-voice dodge, admitting only that “mistakes were made.” Indeed. By whom? Well, earlier this year Mr. Bush released a list of his chief advisers on foreign policy, and it was a who’s-who of mistake-makers, people who played essential roles in the Iraq disaster and other debacles.

Seriously, consider that list, which includes such luminaries as Paul Wolfowitz, who insisted that we would be welcomed as liberators and that the war would cost almost nothing, and Michael Chertoff, who as director of the Department of Homeland Security during Hurricane Katrina was unaware of the thousands of people stranded at the New Orleans convention center without food and water.

In Bushworld, in other words, playing a central role in catastrophic policy failure doesn’t disqualify you from future influence. If anything, a record of being disastrously wrong on national security issues seems to be a required credential.

Voters, even Republican primary voters, may not share that view, and the past few days have probably taken a toll on Mr. Bush’s presidential prospects. In a way, however, that’s unfair. Iraq is a special problem for the Bush family, which has a history both of never admitting mistakes and of sticking with loyal family retainers no matter how badly they perform. But refusal to learn from experience, combined with a version of political correctness in which you’re only acceptable if you have been wrong about crucial issues, is pervasive in the modern Republican Party.

Take my usual focus, economic policy. If you look at the list of economists who appear to have significant influence on Republican leaders, including the likely presidential candidates, you find that nearly all of them agreed, back during the “Bush boom,” that there was no housing bubble and the American economic future was bright; that nearly all of them predicted that the Federal Reserve’s efforts to fight the economic crisis that developed when that nonexistent bubble popped would lead to severe inflation; and that nearly all of them predicted that Obamacare, which went fully into effect in 2014, would be a huge job-killer.

Given how badly these predictions turned out — we had the biggest housing bust in history, inflation paranoia has been wrong for six years and counting, and 2014 delivered the best job growth since 1999 — you might think that there would be some room in the G.O.P. for economists who didn’t get everything wrong. But there isn’t.

What’s going on here? My best explanation is that we’re witnessing the effects of extreme tribalism. On the modern right, everything is a political litmus test. Anyone who tried to think through the pros and cons of the Iraq war was, by definition, an enemy of President George W. Bush and probably hated America; anyone who questioned whether the Federal Reserve was really debasing the currency was surely an enemy of capitalism and freedom.

It doesn’t matter that the skeptics have been proved right. Simply raising questions about the orthodoxies of the moment leads to excommunication, from which there is no coming back. So the only “experts” left standing are those who made all the approved mistakes.

It’s kind of a fraternity of failure: men and women united by a shared history of getting everything wrong, and refusing to admit it. Will they get the chance to add more chapters to their reign of error?

Personally, I believe a main reason why the GOP is plagued by this mindset/blindness is the rise of the Christofascists in the party base.  When your party's base clings to the myths/writings of ignorant Bronze Age herders and hill fort leaders over objective reality and science, as a party you are doomed to the behavior of which the author complains.  Embracing ignorance and putting ideology over reality is not a virtue and ought to disqualify anyone from holding high political office.