Musings on Economic Policies in a Trump Second Term

We don’t know much, but we know tax cuts and tariffs are on the agenda. I suppose that, while he might not execute the Fed Chair (that’s reserved for a select few), he is likely to try to otherwise eject him/her if policy is not to his liking.

On tariffs: A 10% tariff on all imports (oil too!) would result in a reduction in GDP even without retaliation (see Tax Foundation; Committee for a Responsible Federal Budget). A 1% reduction in GDP is extrapolated from the effects in the 2018 trade war.

On tax cuts: cut corporate tax rates to as low as 15%.

On the Fed: Fire the chair if monetary policy is not to his liking.


25 thoughts on “Musings on Economic Policies in a Trump Second Term

  1. Moses Herzog

    “he might not execute”…….. “that’s reserved for a select few”

    Are you certain about that last part??

      1. Moses Herzog

        In donald trump’s case?? Whoever disagrees with him or holds him accountable on days X, Y, or Z.

        Does some media member out there have a count on how many people donald trump has threatened or encouraged violence against?? Do we include the audio tape where he brags about molesting women without consent (that’s not death right??). If we’re not going in chronological order we could start with his 4 years VP.

      1. Moses Herzog

        @ Menzie
        It really makes your mind go to so many things yeah?? He suckers (apparently?? I know military guys tend to be dumb, but…..) General Milley into his fake Bible holding ceremony at the Episcopal Church. He forever shames himself as a military man due to the cajoling of the orange monstrosity. And what is Milley’s reward for going out there and prostrating himself to the nation?? He gets a death threat later from the same man who supposedly suckered him out there to the Church.

        That shows great “reverence to God/Jesus using a Bible as a PR stunt, yeah?? I’m not even joking, I’m surprised donald trump’s hand didn’t immediately combust in large flames when he touched that Bible, something like demonic creatures react to Holy Water in Hollywood films when it’s sprinkled on them. How did the orange abomination’s arm not explode into flames when he touched that Bible?? Still takes my mind into mysterious wonderment. Hopefully his daughter fumigated it when he gave it back to her

  2. James

    Also Trump/Heritage Foundation/GOP plan to fire and replace govt workers with GOP apparatchiks Picture a by-then pardoned John Eastman in charge of the DOJ to get an idea of the everyday corruption we can expect under GOP rule. And the Pillow Guy/Lindell in charge of the Dept of Commerce.
    By the way in regards to GOP and governance – when does the media start asking why the GOP is constantly taking a wrecking ball to our economy?
    A special shout out to WI GOP “moderate” Rep Mike Gallagher – as someone who swore an oath to protect the Constitution both in military and Congress – are you still supporting Trump after he suggested executing Milley – here is what Gen Milley said “And the American people can take it to the bank that all of us, every single one of us, from private to general, are loyal to the Constitution and we will never turn our back on it, no matter what. No matter what the threats.” Are you loyal to the U.S. or are you worried about retaining your seat in Congress. Remember how you almost voted to impeach Trump – that pit just keeps going down -Mike –

  3. pgl

    I skipped that worthless GOP debate last night but maybe this should be our go to quote whenever one of our Usual Suspects makes one of their comments:

    what you’ve just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.

    1. Moses Herzog

      J.K. Rowling’s written dialogue for Albus Dumbledore seems to get weaker with each successive book, doesn’t it??

  4. Steven Kopits

    Here’s a question for you, Menzie. How much of US interest rates can be explained by excess Chinese savings? That is, if the Chinese economy craters, and the Chinese no longer have excess savings to throw at the global economy, should we expect US rates to rise, and if so how much? Or to put it another way, how much of the current rise in interest rates can be explained by economic (savings) dynamics in China? That is, are these high interests rates purely an artefact of the pandemic and related policy to be unwound in the next couple of years; or do they represent more substantially a structural shift of the Chinese economy, implying that US and other rates (eg Japan) will remain higher for longer?

      1. pgl

        ‘Develop New Business via Book Promotion – Even if You Don’t HAVE a Book! You don’t have to write a book to attract new clients. There are innovative book promotion techniques that will help you develop new and repeat consulting business – even if you don’t have a book!’

        Do tell. Is this why Princeton Steve writes those worthless blog posts that no bothers to read?

        1. Moses Herzog

          Hey, this is Kopits’ last chance at bigtime success. Kopits’ efforts to resell Mike Lindell’s “MyPillows” at a 20% mark-up on eBay was a shocking failure.

    1. pgl

      Excess savings? Is that like suppression? Dude – why are you wasting people’s time with your incoherent babbling? I’ll make you an offer – go down to your local community college and sign up for a Principles of Economics class. I’ll pay your tuition. Damn!

    2. Ivan

      I could have answered your question had it been build on a solid premise. Instead I am left with my head spinning every time I look at the words preceding the “?”

    3. Macroduck

      There’s a problem with your premise, that China’s Treasuryholdings represent private investment instead of reserve management. Historically, that has not been the case.

      Recently, China and Japan have both been reducing their holdings of U.S. Treasury debt, in an effort to support their currencies. Nothing to do with saving rates.

      Beyond that, China’s Treasury holdings are smaller as a share of overseas holdings now than in a long time, just 3.4% of the total Treasuries outstanding:

      “Japan’s holdings of $1.1 trillion represent 4.4% of the total, while China’s $835 billion is equal to 3.4%, according to the most recent Treasury data from the end of June.”

      It’s possible that China’s saving rate will affect world interest rates, and so U.S. interest rates, but probably not through private demand for Treasuries.

      If you want to see the impact of China’s divestment relative to other factors in raising interest rates, check changes in the cost of funds and expected inflation vs term premium. I’ve provided a FRED link to a picture of those factors in comments in the past.

      1. Moses Herzog

        @ Macroduck
        I can’t believe you just made a genuine effort to answer Kopits’ lexicon salmagundi. You should get a humanitarian award for time spent helping the intellectually disabled.

        1. pgl

          I stopped trying when Stevie suggested more savings translates into higher interest rates. His comments strike me as something written by the original version of ChatGPT.

  5. pgl

    The Great Curtain Debate?

    Among the numerous heated arguments that transpired between Republican presidential candidates on the debate stage, former UN ambassador Nikki Haley and South Carolina senator Tim Scott got into a particularly frivolous argument over expensive curtains. While addressing government spending, Mr Scott claimed Ms Haley was “someone who has never seen a federal dollar she doesn’t like”, opening the door for the two to verbally spar. With a coy smile, Ms Haley welcomed Mr Scott’s accusations, saying: “Bring it, Tim.” “As the UN ambassador, you literally put $50,000 on curtains at a $15 million dollar subsidised location,” Mr Scott said – a reference to a 2018 New York Times story that revealed custom curtains installed in the apartment Ms Haley received as the US ambassador to the UN cost a whopping $52,701. The accusation appeared shocking and painted Ms Haley, the former South Carolina governor, as a hypocrite since moments earlier, she used her speaking time to criticise federal employees for overspending. But Mr Scott’s accusation was not totally accurate. “You’ve got bad information,” Ms Haley replied. Yes, the bougie curtains in Ms Haley’s former residence were expensive, but Ms Haley was not the one who signed off on the decision. The curtains were initially decided on and purchased during the Obama administration before Ms Haley was appointed ambassador – something the NY Times issued a correction over after they misled readers to assume Ms Haley was the one who signed off on the transaction. But Mr Scott seemed fixated on blaming the lavish curtains on Ms Haley, who appointed Mr Scott to his senate seat in 2017, asking GOP debate viewers to “go watch Nikki Haley on YouTube.” “Do your homework, Tim, because Obama bought those curtains,” Ms Haley shouted. “Did you send them back?” Mr Scott asked Ms Haley. Growing increasingly frustrated, Ms Haley said: “It’s the State Department. Did you send them back? You’re the one that works in Congress. You get it done!”

    WTF is it with Republicans from South Carolina. Now we get that their senior Senator is a worthless joke. But the big issue for these two clowns is curtains?

    1. Moses Herzog

      Uncle Tom Scott was getting his rocks off grilling Gary Gensler the other day for doing his job, breathing oxygen, and other crimes against the upper 1%. If Uncle Tom Scott says “Yes Massuh!!!!” enough times and gives a smiley tap dance to his white masters he might even break 5% In Iowa. Strom Thurmond, George Wallace, and Jesse Helms would be proud of their well-behaved “boy”.

      I just hope Uncle Tom Scott doesn’t pull a Copmala Harris on us and tell us as a young child he cried endlessly because a big yellow bus took him to school every morning~~he never found the “privately funded” school bus and the deep guilt fills him to this day.

      1. pgl

        I thought young Scott had to walk 5 miles uphill in the snow to get to school. Oh wait – South Carolina does not get that much snow.

  6. pgl

    So what did Trump tell those Michigan workers?

    Former President Donald Trump used his speech at a nonunion plant in Clinton Township, Michigan Wednesday night to simultaneously posture as a lifelong champion of workers and denigrate the United Auto Workers’ historic strike against the Big Three U.S. car manufacturers, dismissing the union’s fight for better wages and benefits as effectively meaningless. “I don’t care what you get in the next two weeks or three weeks or five weeks,” Trump said. “They’re going to be closing up and they’re going to be building those cars in China and other places. It’s a hit job in Michigan and on Detroit.”

    It was a theme the former president and 2024 GOP frontrunner hit repeatedly throughout his remarks at Drake Enterprises, a truck parts manufacturer that offered to host Trump’s rally: The electric vehicle transition and the Biden administration’s efforts to accelerate it are going to send jobs overseas and leave the U.S. automobile industry in ruins.

    “It doesn’t make a damn bit of difference what you get because in two years you’re all going to be out of business, you’re not getting anything,” Trump said. “I mean, I watch you out there with the pickets, but I don’t think you’re picketing for the right thing.” The former president repeatedly and falsely accused the Biden administration of attempting to bring about a “transition to hell” and impose “electric vehicle mandates that will spell the death of the American auto industry,” a narrative that was also prominent during the Republican primary debate that Trump skipped.

    1. Moses Herzog

      ” ‘The Trump administration has taken credit for ‘reshoring’ manufacturing jobs, but the data show that isn’t true. Nearly 1,800 factories have disappeared under Trump between 2016 and 2018,’ said Scott. ‘Additionally, the U.S. trade deficit in manufactured goods rose significantly between 2016 and 2019. In fact, the real U.S. trade deficit has increased in every year since 2016, reducing GDP growth by roughly 0.25% annually over the past three years. Compounded with the devastation left by the coronavirus pandemic, the blue collar manufacturing workers need serious help from policymakers.’ ”

      1. pgl

        “Trump’s trade war has officially moved American jobs overseas. In a regulatory filing on Monday, iconic motorcycle manufacturer Harley-Davidson (HOG) said it is moving the production of motorcycles bound for the EU out of the U.S. as a result of new tariffs. Harley-Davidson said that tariffs enacted by the EU in response to Trump’s tariffs on the import of steel and aluminum from the EU increased the duty paid by Harley Davidson’s Europe-bound bikes made in the U.S. to 31% from 6%. This will increase the cost of an average motorcycle by $2,200, the company said. As a result, Harley-Davidson said it will increase production at its international plants over the next 9-18 months.”

        I bet the UAW folks remember this when Trump started claiming it was Biden rather than Trump that cost US auto workers jobs.

        BTW – our host asked us years ago to think in terms of the Effective Rate of Production. This one was a real world example.

      2. pgl

        “In addition to the Trump administration’s overall weak trade agenda, COVID-19—and the administration’s mismanagement of the crisis—has wiped out much of the last decade’s job gains in U.S. manufacturing. Scott explains that unless steps are taken now—to reform our trade policy, to curb dollar overvaluation, to eliminate tax incentives for offshoring, and to rebuild the domestic economy—there won’t be a comeback.”

        Wait for it. Bruce Hall is going to tell us the COVID lockdowns were the cause of these job losses.

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