J. Bradford DeLong has an excellent article on Rudderless America. Let’s discuss.
No Policies to Believe In
Kudos to DeLong for his excellent article on Rudderless America
It should be obvious by now that the second Trump administration has no policies, nor even any policymaking processes. All that matters are the “instincts” of one ignorant man, and the eagerness of those around him to put their own interests ahead of the fate of the country.
As Bloomberg’s Chris Anstey explains, Bessent has a “grand encirclement” plan, and if this “sounds familiar, that’s because… [t]he Obama administration’s big trade idea was using the Trans-Pacific Partnership to assemble a coalition of Pacific Rim nations that would increasingly be tied to the US, and not drift into China’s orbit.”
The problem is that resurrecting Obama’s strategy is probably no longer possible. The TPP now exists as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, none of whose members will regard Trump as a credible or trustworthy negotiating partner. Bessent wants to work with “Japan, South Korea, Vietnam, and India,” but while these countries will play nice, none would be so foolish as to concede anything meaningful to Trump. Mexico and Canada went down that path during his first term, when they agreed to renegotiate the North American Free Trade Agreement, and now they find themselves among the first countries Trump targeted for renewed bullying.
Moreover, Bessent is obviously either deluded or lying when he suggests that he is reflecting the administration’s view. No one has a mandate to speak for Trump, whose decision-making changes minute to minute on the basis of “instincts” and whatever happens to be showing on his TV. Trump may instinctively agree to a policy proposal by Bessent, but if the next person he sees tells him no, Bessent may be left to explain why he cannot deliver what he promised. Such is life at the court of the mad king.
Former US Secretary of the Treasury Lawrence H. Summers sees it differently. “The sole preoccupation that I would have if I were in the government would be with what the president was saying. … The president is entitled to have advisors who believe in his policies…. Individuals are entitled to follow their conscience.”
But this is “sanewashing.” As Summers knows, there are no policies to believe in. Policies embody clear goals, not to mention staff work, modeling, and analysis of various scenarios that may arise in their pursuit. What we have here is one ignorant man, surrounded by sycophants, wandering around spouting bullshit as the cameras roll.
This is business as usual for Trump, who is just playing the role he filled on the set of The Apprentice. The difference is that The Apprentice had highly capable producers and editors who could render all the messy raw footage into a compelling, clean final product. The current White House has only a live feed.
The Trump White House has no editor, only spin doctors. Trump will say something, and some adviser will rush to declare, “See! This was always the plan!” But these courtiers are not on the same page themselves. Sometimes, economic adviser Peter Navarro seems to have the upper hand; sometimes, Elon Musk does; and sometimes one detects the influence of Bessent, Commerce Secretary Howard Lutnick, Stephen Miran of the Council of Economic Advisers, or Kevin Hassett of the National Economic Council. But these factions agree on very little, and Trump ultimately trusts none of them anyway.
My own vote for domestic-policy regent would go to Bessent, not because I think he would do well in the job, but because he might do less harm than anyone else who is actually willing to work for such a man. But none of this is going to happen. And that is why America and the world are in serious trouble.
An Honest Assessment
A reader on my blog this morning said I should give trump a break.
I replied “I didn’t give idiotic policies a break under Biden and I won’t now.
Here you get an honest assessment.“
Other than participation in the cult, I would find it difficult to believe that people could actually believe the convoluted and contradictory policy goals of this president.
On April 9, when Trump Capitulates with a 90-Day Pause on Tariffs with the stock and bond market plunging, I commented “Trump has had enough of the stock market decline.”
What we did not know at the time was Bessent’s role in this pause.
Later that day, Bessent bragged “Trump Goaded China into a Bad Position”.
I called it the lie of the day, now revealed as such.
The lies are endless. Here’s a real hoot: Trump Says “Car Companies Will Be Thrilled With Tariffs”
The word of the hour is “thrilled” by 25 percent tariffs on autos starting April 2.
This morning I noted How the Tariff Pause Happened – Navarro Was Purposely Out of the Room
The Trump studied reciprocal tariffs for a month, concocted a wild-ass formula that had nothing to do with tariffs at all, then backed down when the stock and bond market puked.
Why should anyone give these idiotic policies a chance?
But to the true believers, this is 5D chess.
How the 5D Plan Works
- Collect taxes from US consumers via massive increases in tariffs. Claim they will fund tax cuts, bring jobs back, and balance the budget, not noting the contradictions.
- Goad China into a response.
- Explain this was part of the master plan.
Bessent is bragging that over 50 countries want to negotiate. Well la de da. Of course they do, but in practice it’s impossible because of Trump’s idiotic definition of reciprocal.
Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
On March 12, I commented Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
We have an annual trade deficit of $918 billion.
Team Trump proposes $918 billion in “reciprocal tariffs” to make the trade deficit go away.
But to balance the budget and eliminate personal income taxes, Trump would need to collect $7 trillion in tariffs on a net trade deficit of $918 billion.
I would love to hear a detailed explanation of exactly how that works.
Are you ready for that miracle? Me too. But wait, there are still more benefits to this amazing deal.
Trumps Claims
- Tariffs will increase revenue enough to balance the budget
- Tariffs will bring manufacturing back to the US
- Tariffs will reduce inflation
- Tariffs will increase exports
Conflicting Economic Madness
Points 1 and 2 conflict. Tariffs cannot simultaneously bring back manufacturing and raise enough revenue to balance the budget.
Points 2 and 3 conflict. Since the US is one of the world’s highest cost producer of goods thanks to unions, tariffs will not reduce inflation.
Points 2 and 4 conflict. Since the US is one of the world’s highest cost producer of goods, and other countries will retaliate, tariffs will not increase exports.
No one yet can fully explain Trump’s economic plan because it’s all double- or triple- counting of contradictory ideas.
On April 8, I noted Musk Calls Trump’s Trade Advisor a “Moron Who’s Dumber than a Sack of Bricks”
Former Trump Chief of Staff Mick Mulvaney sides with Musk regarding Trump advisor Peter Navarro:
“I would have fired [Navarro] a long time ago. I would have fired him when he got caught making up his academic sources for his papers, with his Ron Vara imaginary friend.”
Musk sure got that one right.
Rand Paul on Trade
Senator Rand Paul gave a interview regarding trade with Kudlow.
Here’s a link to Rand Paul with Kudlow. Please play the video.
Paul: “We get a reduction in trade deficits when we go into recession. … a 50 percent tax on shoes from Vietnam. You think we going to make shoes in the US? It’s also not a bad thing shoes are not made here. Adam Smith talked about the division of labor. A fundamental aspect of capitalism is the division of labor and trade. Something so fundamental, you shouldn’t try to stop.”
Kudlow challenged Paul on “fair trade”. Paul responded beautifully.
Just play it.
The Fundamental Problem
The fundamental problem is there are no restrictions on deficit spending or trade imbalances.
Nixon started this in 1971 when he ended gold convertibility.
Prior to that, if nations spent too much and deficits soared interest rates would have to go up to stop the gold outflow or the deficit would have to drop.
Nixon’s treasury secretary John Connally famously told a group of European finance ministers worried about the export of American inflation that the “dollar is our currency, but your problem.”
Balance of trade issues, soaring debt, declining real wages, and the demise of the US middle class are now our problem.
Prior to Nixon closing the gold window, Imbalances were self-correcting. There is no control on spending now. Tariffs will not and cannot fix this problem.
Reciprocal tariffs won’t come close to paying for all of the things Trump wants. Expect fiscal deficits to rise dramatically.