What should we expect or fear in economic policy if Donald Trump returns to the White House in 2025?Thank you for reading this post, don't forget to subscribe!
The challenge here is to separate what may have germinated in his or his advisers’ minds and what long-term priorities of the Republican Party remain. We saw the difference between 2017 and 2020. On key matters, Trump defied then-Senate Majority Leader Mitch McConnell (R-Ky.) and Republicans in Congress. He swallowed his prescriptions on judicial appointments, and he helped push a bill to cut taxes, which primarily benefited the wealthy and corporations. But in other ways he left the reservation.
The most obvious deviation was his rhetoric about the trade deficit, which I’m convinced he could never define correctly. (In national income accounting, this is the excess of imports over exports.) This may sound bad, although it doesn’t have to be.
In any case, we got very realistic tariffs. Trump’s rhetoric on trade was appealing to manufacturing workers upset with outsourcing. Even progressive heroes like Senator Sherrod Brown (D-Ohio) decried Trump’s move to impose tariffs on steel. The Biden administration itself has refused to reverse all of Trump’s first-term tariffs.
Simply put, a tariff is a sales tax that is limited to imports. Saying the Chinese “paid” the tariffs non sequitur, like saying that the supermarket pays sales tax. This makes it all the more ridiculous for tariff supporters to complain about inflation. Like sales taxes, a tariff increases the gross prices you as a consumer pay. The seller who collects the tax (the importer, or the supermarket) simply hands it over to the government.
The anti-China rhetoric from the former president has continued, even though we now have evidence of Trump’s businesses being on China’s payroll. The revival of trade democracy under President Trump 2.0 will hinder trade and increase inflation. The new tariffs will raise prices – not a good outcome for everyday working people.
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Trump’s trade rhetoric matches neither with historical Republican policies nor with its current tribune at the Koch network’s Club for Growth. But that is an old party. It’s a new day, and not a better one.
Another area of concern is immigration. As supporters of employers, Republicans have promoted immigration to recruit cheap labor. Banning immigration would make some employers unhappy. From a regular trading perspective, “closing the range” could mean chaos. America does a lot of business with Mexico.
But once again, it is a new day. The racism-infused demonization of immigrants has become one of the GOP’s major selling points. It may also be related to the perceived increase in support for Trump from voters of color, particularly men.
Another new thing will be promises to blow up the “administrative state.” I’m old enough to remember when President Ronald Reagan appointed Bill Bennett as Secretary of Education. Bennett promised to help abolish the Department of Education. Turns out he loved the work, and the DOE tolerated it.
Still, reports that Trump’s team plans to flood the federal bureaucracy with toadies do not bode well for implementation of the rules. These characters may not work out of the jobs themselves, but are likely to succumb to business interests that oppose any kind of regulation in many other areas, such as the environment, food safety, occupational health and safety, and worker rights. .
An example where Trump may have done some good things during his presidency, but Congress failed him on infrastructure. Trump considers himself a builder, so he likes infrastructure. Like his New York real estate career, he thinks you can finance it with funny money. But his administration was too focused on other things to produce a real plan, and the Koch-y Congress blew it up.
The fate of the humble US Postal Service will be a little more unclear. Biden has apparently been very busy removing Trump-appointed toxic, corrupt Postmaster-General Louis DeJoy. Pressure to privatize the USPS is likely to increase again as Trump changes its board of governors. The Federal Aviation Administration may face similar threats.
Many additional questions remain. What about Social Security and Medicare? We know the old Republican Party wanted to reduce them. Trump has danced around it. Obamacare will almost certainly end, Medicaid is in grave danger. And we’ll probably also say goodbye to Biden’s limits on some prescription drugs (no matter how few they are).
We may see the future as an expansion of Medicare Advantage, to the detriment of the rest of Medicare. This is a way to segregate beneficiaries based on income, and allow the better off and healthier people to siphon resources from the program for everyone else.
Reproductive rights is an issue that Republicans have understood requires some caution. The right-wing extremists in Congress don’t care, but Trump is smarter than them. Reforms may come more in the form of a death by a thousand cuts, rather than a blanket, national ban. As a result, abortion seekers in red states will have to travel for care. The Fed won’t rein in red states, which have, after all, achieved national political dominance without requiring voter approval.
Chaos reduces investor and consumer confidence. This may hamper economic development.
Otherwise, I would expect an uneventful path for policy, similar to what we saw in Trump’s first term, except for continued brutality on immigrants, people of color, LGBTQI individuals, and women.
The possibility of chaos makes predictions about the economy even less certain than usual. The impact of presidents on inflation, economic growth, and unemployment is generally exaggerated, depending on who is talking, and whether credit or blame is due.
Chaos reduces investor and consumer confidence. This may hamper economic development. A major influence is always that of the Federal Reserve, which is outside the control of the President. Efforts to reduce the deficit will reduce employment, but I would be surprised by any congressional heroism in this department.
In putting forward their own economic platform before this year’s election, Democrats may point to some helpful industrial policies like the Inflation Reduction Act, but these are not easy to explain, and Democrats are generally not very good at explaining. Creative, progressive trade policies have been adopted that support good-paying manufacturing jobs, but these are also not easy to explain.
In general, Democrats have a lot to say about the economy, which should help them in the upcoming elections, yet the role of the Biden administration’s policies should not be overstated. Progress in recent years has been clear, but progressives had a lot to say about the inadequacies of the US economy in 2016, at the end of Obama’s second term. Medicare was not for everyone. Unemployment insurance was a mess. There was a lot of inequality here. Gun ownership was out of control. The MAGA crowd was gearing up. You can create your own list.
Today, structural inequalities persist, the housing market is in crisis, and we still can’t build back better. These are all good cases for Biden and Democrats to make a case for in the coming elections on a clear plan to support working people and build a more fair economy.
All signs currently point to a good year for the economy, and giving Trump this legacy in late 2024 will help him, just as Obama’s record on leaving office helped boost Trump in 2017 and beyond. . Still, trade war drama regarding Iran, cutbacks in domestic spending, and saber-rattling or worse, could also impact economic outcomes in 2025 and the years to come if the former president returns to power.
If the most dire predictions of Trump’s second term regarding his use of the Justice Department and law enforcement to target his political opponents come to fruition, economic policy may be the least of our concerns.