Put it this way: The Trump tax cut was supposed to create a boom so powerful that it would not only withstand modest Fed rate hikes, but actually require such hikes to prevent inflationary overheating. You don’t get to turn around and claim betrayal when the Fed does exactly what you expected it to do.
Aside from blaming everyone but himself, however, how will Trump deal with the failure of his economic promises? He has taken to demanding that the Fed roll the printing presses, slashing interest rates and buying bonds — the actions it normally takes in the face of a serious recession — even as he claims that the economy remains strong, and unemployment is in fact near a historic low.
As many people have noted, these are exactly the actions Republicans, including Trump, denounced as “currency debasement” when unemployment was far higher than it is today and the economy desperately needed a boost.
Since the Fed is unlikely to oblige, what else might Trump do? Officials have floated, then retracted, the idea of a cut in payroll taxes — that is, a tax break for ordinary workers, rather than the corporations and wealthy individuals who mainly benefited from the 2017 tax cut. But such action seems unlikely, among other things because top administration officials denounced this policy idea when Obama proposed it.
Trump has also suggested using executive authority to reduce taxes on capital gains (which are overwhelmingly paid by the wealthy). This move would have the distinction of being both ineffectual and illegal.
What about calling off the trade war that has been depressing business investment? This seems unlikely, because protectionism is right up there with racism as a core Trump value. And merely postponing tariffs might not help, since it wouldn’t resolve the uncertainty that may be the trade war’s biggest cost.
The truth is that Trump doesn’t have a Plan B, and probably can’t come up with one. On the other hand, he might not have to. Who needs competent policy when you’re the chosen one and the king of Israel?
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