Trump’s Magic Inflation Wand

Reagan needed years to tame Carter’s inflation & it will likely take Trump as long to end Biden’s. First, deregulate industry & slash US deficit by attacking gov’t waste/fraud. Then renew pro-growth tax cuts. Good. But cut interest rates & impose tariffs now?

That sums up the WSJ’s thumbs up & thumbs down as it looks into its economic crystal ball during the first 3 weeks of “Trumpanomics.” The editorial board’s somewhat positive early assessments notably got cautious as the latest government figures showed a modest rise in prices for the third straight month. They had been warning about Trump’s love affair with newly announced if future “fair & reciprocal trade tariffs,” the cost of which will invariably be passed on to consumers, as a one-two policy punch. Trump insisted his tariff plan won’t raise prices much but will raise enough money to replace the income tax, plus help gain leverage over foreign countries so they conform to his “America First” agenda.

But, enough on that debate. The WSJ really freaked out over No. 47’s call for “immediate” lower interest rates aka “easier money” while inflation persists. “Does he want inflation to resume its Biden-era climb?” they asked. At the crux of the editors’ frustration is their believe Trump has the laws of economics “backwards” on this one: “Rising inflation means the Fed must be more cautious in cutting rates” to staunch inflationary pressures, not encourage them. They explain: “Mr. Trump isn’t responsible for this” situation “after only 3 weeks in office. But someone should tell him that the mistake [he’s proposing] goes back to the Fed’s premature interest-rate cut of 50 basis points in September. Long bond rates shot up immediately & have stayed higher.” Regardless, unless he has a magic wand Reagan did not, the law of economic ebb-flow suggests Trump’s war on inflation & foreign competition may outlive the Russo-Ukraine War.

Davd Soul