Dem
47
GOP
53
Let us begin here by noting two things. The first is that we believe the Trump Economy is already upon us, and has been for at least two fiscal quarters. The second is that we recognize that, for some people (MAGA), it will be the Biden Economy for as long as that is convenient.
What we are talking about here, then, are the independents, and also the low-information voters who don't think about these things nearly as much as, say, readers of this site do. At a certain point, Biden's presidency will be far enough in the rearview mirror that these people will instinctively switch over to "It's the Trump Economy." Further, there will be big-time news events, the sort that are reported everywhere, that will help to push these folks in that direction. One of those events will soon be upon us, as Donald Trump says that this morning, he is going to announce his nominee to be the next chair of the Federal Reserve.
The early favorite for the post, and the person still leading in the betting odds, is BlackRock chief investment officer for fixed income Rick Rieder. Rieder is a Wall Street insider, is generally a fan of lower interest rates, and is good on TV (including frequent appearances on Fox and Fox Business). These are all things that Trump values highly. However, Rieder also has some debits against him. First, in the past, he has committed the nearly unpardonable crime of donating money to Democratic candidates for office. It is clear he was engaging in the old "donate on both sides of the aisle" strategy, as rich people who are subject to government regulation are prone to do, but it's still a sin in Trump's eyes (even though he used to do it, too). The second debit is that Rieder has been mildly critical of some Trump policies, particularly the tax cuts for rich people.
These things being the case, it is not surprising that Trump appears to have switched gears. He dropped several hints yesterday that suggest strongly the pick will be former Fed Governor Kevin Warsh, who was seen at the White House on Thursday by reporters. Warsh is also a Wall Street insider, and he reportedly did well in interviews with Trump. Further, in Trump's own words, Warsh "looks the part." As we all know, this is the single most important thing to consider when choosing the person who will be the lead shepherd of the U.S. economy.
It may take a while for Trump's pick to be seated. Jerome Powell's term does not end until May 15, and if the phony investigation of Powell continues, and Sens. Thom Tillis (R-NC) and Lisa Murkowski (R-AK) follow through on their threats, consideration of Trump's nominee might be blocked for a while. However, the day will eventually come that the Fed is chaired by Trump's handpicked appointee. Actually, it's already chaired by Trump's handpicked appointee, but since Powell was re-appointed by Joe Biden, Trump has generally been able to pass that buck. The buck passing will be much harder once it's a 100% Trump guy in charge, which will deprive the President of one of his best scapegoats.
In a related note, some dark economic clouds are looming. If you believe the usual formulation of "Big news of the day" = "Explanation for whatever the stock market does that day," then it would seem Wall Street does not like the Warsh pick. After Trump effectively leaked the news, the markets dropped around 1%. We tend to think that these cause-and-effect stories are usually too facile, but we're also not experts in macroeconomics, so we could be wrong.
More substantively, the U.S. trade deficit went through the roof in November of last year. Yes, November—reporting has been delayed because of the LAST government shutdown. The increase was 94%, the largest month-to-month increase in 34 years. Trade deficits are not necessarily a bad thing. However, the Trump administration believes they are, and fixing that was a major reason for the tariffs. The November report would seem to suggest the tariffs are having the exact opposite of the intended effect.
Back to the stock market, it is true that it grew during the first year of Trump v2.0, and that the Dow set new records (as it does nearly every year). However, it is also true that the market did worse in the first year of Trump v2.0 than in the first year of any presidential term since George W. Bush in 2005. Inasmuch as the first year of a presidential term tends to be an economic honeymoon period, that is not a good portent for the next 3 years, especially given some of the... economically unwise policies this administration tends to pursue.
For an example of such a policy, consider the rule change that the White House is considering for international visitors seeking a longer-term (90-day) visa. The plan is to add a new requirement to the list of things such an applicant must provide: a list of their social media accounts. The implied threat is that the feds will scour the accounts for evidence of illegal/problematic activity.
This idea makes no sense to us, from a purely logistical standpoint. If the U.S. says "give us your social media accounts" and a person says "I don't have any," how does the government prove that you're lying? Maybe if the person's name is Yustrepa Gronkowitz, or something like that, but a Google search isn't going to help if the person's name is Huy Nguyen or José Ramirez or Jian Park. Further, do we really imagine that actual bad guys reveal their plans on their eX-Twitter accounts? Maybe someone has been watching too many James Bond movies.
We have to assume that the thinking behind the plan is that the mere existence of the requirement will cause dubious people to think twice about applying, and so baddies will be weeded out that way. We find even that proposition to be questionable, but maybe it could work with at least a few bad guys and gals. The tradeoff, of course, is that a lot of perfectly innocent people will be put off by the demand—either by the hassle it entails, or by the presumptuous intrusion on their privacy. A new report estimates the annual impact would be around 4.7 million fewer tourists, and a loss of nearly $16 billion in tourist revenue. Think that will make folks in Las Vegas or Orlando happy?
That is, of course, just one example of a foolish economic policy (which presumably would serve mostly as security theater). We had an item yesterday about some of the other ways Trump is cutting the U.S. economy off at the knees, and redirecting commerce in the direction of South America and China, probably permanently. He will have nobody but himself to blame, and the day will soon come when the majority of voters will agree with that statement. (Z)
Update: Moments before we went live, Trump did indeed nominate Warsh.