The Trump Administration is probably economically illiterate and that’s pretty dang unfortunate of the United States. The Trump Administration is going to push policies that will ultimately increase inflation and lead to unsustainable growth.
The Trump Administration is going to pursue policies to promote “hot” growth wherever they can. They want to pump up the economy and run it hot. This will most likely involve doing thing like not enforcing EPA rules, allowing ridiculous mergers, offering permits to drill on pristine government lands, giving corporations tax cuts, preventing off shore wind power, incidentally giving billionaires tax cuts, and using tariffs injudiciously. That sort of thing but across vastly more agencies / departments. All in the pursuit of red hot growth.
But there is no point in growing GDP by 4% instead of 3% if that extra percentage point is coming from wasteful investments that have no long term utility. Which is a very real risk when you implement a variety of economic policies that are meant to run things hot… distortions in the marketplace lead to unsound investments which leads to a boom to bust cycle. It’s just not good.
And to top it off, ultimately the Trump Administration will try to force the Federal Reserve to lower rates because “high rates bad”. High rates are annoying but they aren’t all bad. High rates help keep the economy in check and away from doing insane things. They help to keep inflation down. High rates even help the consumer earn more money on their savings. They’re just an overall net positive for everyone.
But the point that high rates can be good has always seemed to be lost upon Donald Trump, with him ranting about the Federal Reserve on several occasions. I believe it was one of the things he got mad about during his rallies. And Jerome Powell specifically. The Trump Administration is not going to support the Federal Reserve and its mission.
The hatred for the Federal Reserve, the hatred for high rates, and the implied desire to run the economy hot, while cutting regulations, tells me that the Trump Administration may not have an educated “guiding light” in the realm of economics. The United States may just be at the whim of Donald Trump’s arbitrary moods.
It doesn’t even matter that Donald Trump has people in the Administration who do have familiarity with economics if he doesn’t actually listen to them or if these people have perverted views of economics. It’s just an echo chamber.
And that should scare you.