Trump's Economic Plan for a Second Term
What does Trump 2.0 mean for the economy?
Last week Donald Trump sat with Bloomberg for an in-depth interview on his economic plans. Zerohedge wrote up a great summary.
Trump’s Second Term Plans
In short, Trump plans more of what he did first time round: Lower taxes -- he's floating 15% rates. Slashing red tape, drill baby drill, and new tariffs, especially on China -- which Trump again floated as a replacement for the income tax, which would be glorious if it came to pass.
He plans to end the foreign wars, including Ukraine and a theoretical war over Taiwan. And, of course, he plans to restore the border and deport 10 million plus illegals Joe Biden imported for us.
Oh, and no taxes on tips.
On the Fed, Trump plans to keep Jerome Powell until his term ends in early 26 -- note it's nearly impossible to remove a sitting Fed Chair before his term ends. He thinks the Fed should hold off rate cuts since inflation isn't tamed yet, which is correct.
The Economy and the Election
The political background here is that inflation and jobs remains the top issue for American voters, and the numbers for Biden are only getting worse -- yes, even the official numbers.
Biden's losing working class voters, he's losing Hispanics, he's even losing black men who are a pillar of the Democrat coalition.
This actually plays directly into Trump's strength, his economic management. Last time around Trump took an anemic Obama economy and delivered nearly 3% real growth per year, drove unemployment from almost 5% under Obama to just 3.5. He kept inflation low -- it was 1.4% when Trump left office, down from Obama's final read of 2.6%.
Note that Trump delivered 1.4% inflation even with his tariffs on China. Which the media is currently using to claim — without evidence — that Trump would bust inflation.
The one part that's missing is spending restraint -- getting federal spending down to the point it stops feeding inflation.
I mentioned in a recent video that Trump's been about average on spending, comparable to Bush or Obama. Still, that's a damn sight better than Biden, who's greenlighted every activist handout with a trillion-dollar price tag on it.
Granted, we could see savings from ending the forever wars and deporting millions of illegals, but ideally we'd go full Javier Milei, cancelling entire departments like the Department of Education, foreign aid, or -- God willing -- the IRS.
I have no doubt Trump would like to do these things. But every federal dollar has a political cost to eliminating it, so I understand the political reality, especially before the election.
What’s Next
Beyond what Trump plans to do, the question is can he get it through Congress. Betting markets are currently putting Trump at 68% chance of winning -- keep in mind betting markets, in theory, capture the margin of cheating.
They give even higher odds for a GOP Senate -- 78%. Albeit with a slim 52 to 48 margin vulnerable to RINO's.
But those same markets say it's 50/50 who controls the House, where bills have to originate.
So the question is whether Trump's coattails -- or Joe Biden's stink -- carry enough down-ballot Congressional races.
If voters deliver Trump a workable Congress, then he could quickly pass tax cuts and deregulation that would start taking the edge off inflation, granting that to actually wipe out inflation would take getting Javier Milei level spending cuts through Congress.
The other elephant in the room is the recession. Taxes and deregulation make us rich in the long run, but it takes times for new businesses to start, existing businesses to expand, or new factories to be built.
A few weeks ago I argued we may already be in recession, hidden by rising asset values by the Fed. With potentially more to come as the federal debt train runs off a cliff.
So it may be too late to skip the downturn, but we have the chance to start digging out of this hole while building a strong foundation for the future.
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Even if Trump was a Superman, there are certain structure issues that no one, he or anyone else, will be able to fix even if he wins the upcoming election (assuming the election happens): a $32 trillion national debt with a $2 trillion a year deficit, 30% of U.S. tax receipts going toward debt interest payments alone, and 20 million illegal Democrat voters let into the country in just the past 4 years.
Peter,
Unfortunately, the medicine we took for the last financial crisis was really poison that is setting in the table for the next, much bigger problem.
They are hiding economic tumult using inflated asset prices and fake employment data.
Trump is going to get the blame not the praise.
Just like they want.