The signs of health risks for the U.S. economy suddenly are everywhere. And President Trump’s prescriptions for prevention would actually be poison for the patient.
At a single time today, the Drudge Report featured four stories all pointing to different worrisome economic indicators, while the Wall Street Journal’s website was publishing a fifth. Trump’s quack medicines for the problems include significantly higher federal spending, significantly lower interest rates, and more aggressive trade wars. What’s needed instead is lower federal spending, steady interest rates, and a major relaxation in trade tensions.
Let’s review the bad news. Story number one is headlined, “Bankruptcy filings rise across the country and it could get worse.” Both individuals and businesses are struggling with debt loads, even worse than during the financial crisis of 2008-2009, that they cannot handle.
Trump’s solution is to make borrowing even cheaper by browbeating the Federal Reserve into reducing interest rates that already are well below the historical average. That’s nonsensical. The right answer isn’t to encourage more borrowing, but to reward more saving.
Story number two is headlined, “Bank of America raises chance of recession to 1-in-3 in the next 12 months.” Why? Because “uncertainty around the U.S.-China trade war and a global economic slowdown” is combined with a situation in which “business investment is low as investors and business owners juggle new tariffs and fiscal policy uncertainty.”
Trump’s fiscal policy of spending more and more, faster and faster, is reckless to the extreme. Record government indebtedness crowds out private-sector investment, and leaves the government without a useful fiscal mechanism to counteract a real economic crisis.
The other element in story number two, the U.S-China trade war, is the main focus of stories number three, four, and five. Trump’s trade war is a disaster, which is why every time he raises tariffs or talks tough, American investment markets tank. Story three explains that “‘Trump is ruining our markets’: Struggling farmers are losing a huge customer to the trade war – China.” Story four, the one from the Journal, explains that specifically because of Trump’s tariffs, “businesses are squirming.” For example, “an importer of vinyl flooring spends ‘nearly 100% of my energy’ trying to defray the cost of Washington’s levies on Chinese products.” Said the businessman: “This is a chaos moment.”
It’s not just the tiff with China that is problematic, although that is certainly the largest of the “geopolitical tensions” that story five describes as being at the heart of “anemic global data.” It’s Trump’s trade jingoism against the whole world that is at fault. Not content to use punitive tariffs against foreign companies selling to the United States, Trump is also threatening foreign countries that invest in the United States and in U.S. workers.
Witness Trump’s bewildering threats against Airbus, the chief competitor to the incompetent American lobbying bully, Boeing. Never mind that Airbus employs about 1,000 workers in Mobile, Alabama, while providing a hub for several thousand more air industry jobs there, and that it also employs hundreds of people in Wichita, Kansas; northern Virginia; Miami; and Denver.
Trump seems not to understand that hurting the economies of other countries also hurts the U.S. economy. This has been a fatal problem in his understanding that we have pointed out here repeatedly since before his election. What will bolster U.S. growth isn’t trade “advantage,” but trade other nations that is robust and mutually advantageous. The faster the velocity of worldwide trade, the better the international market for American goods and services.
Trump is trying to use 19th century mercantilist policies in a 21st century global economy. It’s the economic equivalent of snake oil, and it could make the patient, the American economy, much sicker than it is now.
