The boiling stock market and the lowest unemployment rate in 50 years have blinded their eyes, and few people dare to question the wisdom of US economic policies.The current joy has caused the scientific objective analysis to lose its strength.This is a big mistake.The wrong financial stimulus, radical tariff measures, and unprecedented attacks on the Federal Reserve have formed toxic policies. We must evaluate Trump Economics with a more critical attitude.
Politicians and flight attendants always have a way to reverse policy debates.For US President Trump and his supporters, upside down has reached a new height.Obviously, the federal deficit is expected to swell 1.5 trillion US dollars in the next 10 years, or government debt will reach the highest level since the World War II in 2029; MDash; account for 92%of GDP (GDP). These are not important.EssenceThe tax reduction measures that cause these concerns are packaged as a necessary condition for the United States to re -the United States, and obtain rationality.
It is not important to be regarded as tariff measures for consumers' taxation or hindering the efficiency of global supply chain. On the contrary, they are depicted into weaponized negotiation leverage and forcing trading partners to change their treatment to the United States.The attack on the independence of the Federal Reserve is not considered a dual mission of MDASH; MDASH; the threat of maximizing employment and ensuring stability of prices is to be regarded as the privilege of the president to exercise its use of the Bully Pulpit.And as long as he thinks it is appropriate.
Trump's economic policy has three fundamental defects.First, there is nothing to do between intention and influence.Political manipulator believes that a significant reduction in corporate taxes can improve US competitiveness.But this does not mean that deficits are not related to debt.Although the commitment of supply -side economics is quite empty, the tax burden is transferred from a field of economy to another income neutral financial measure, which is closer to real reforms, not the reduction of overall taxes.
In addition, the unemployment rate at the end of 2017 was 4.1%of the periodic low, and it was moving towards the current 3.6%. At that time, fiscal stimulation was implemented, which caused a bubble in the market and economy. The least needed was the foam at the time.If the growth is sluggish, it is useless to increase the stimulus.
Similarly, Trump's tariff measures are similar to the 1930 Smoot Hawley Tariff, one of the largest policy errors in the 20th century, and the latter led to 60%of global trade in 1932.At present, foreign trade accounts for 28%of the US GDP, and in 1929 it was 11%. Today, the United States, as a debt country today, is more vulnerable to trade -related destruction than to be a net debt -owned country at that time.
Trump completely regards the direct and retaliatory tax faced by consumers and enterprises regardless of the tariff war, and describes tariffs as a beautiful thing.This is reminiscent of the painful memories of the Republican Congress of 1928. At that time, tariffs were described as the basic principles of this country's economic life hell; HelloP;Trump ignored the lessons of the 1930s, which was a great danger.
Trump's recent attack on the Federal Reserve is the same.The political independence of the central bank was widely considered to be a major breakthrough required for the stability of prices after the 1970s.Humphrey-Howkins Act, which was formulated by the United States in 1978; Humphrey-Howkins Act gave the political guarantee required by Paul Volcker, then Fed, which allowed him to tighten the fierce currency from the system from the system.Double -digit inflation was squeezed.If Walker has no freedom of action, he will be constrained by the political leadership of political leaders, and this is exactly what Trump is doing and refers to the policy of the current Federal Reserve Chairman Jerome Powell.
The second key defect of Trump's economic policy is that he did not recognize the relationship between budget deficits, tariffs and monetary policies.Just as the late economist Martin Feldstein has always emphasized, in the case of budget deficit brought downward pressure on domestic savings, greater trade deficit becomes a means to fill the emptiness with overcover foreign savings to fill the emptiness.EssenceTo deny these relationships, it can easily allow the United States to blame China on China.
However, because tariffs may transfer trade and supply chains from low -cost Chinese manufacturers to higher cost replacements, American consumers will be impacted by rising taxes, thereby increasing the risk of inflation.Although the possibility of the latter seems to be far away today, it may have an important impact on the US monetary policy. Of course, the Federal Reserve also has political independence.
Finally, when evaluating the influence of policies, remember that there is always a lag.Although the budget deficit increases, low interest rates will alleviate the short -term pressure of debt repayment costs, but it cannot guarantee that this trend will continue for a long time, especially the cumulative value of federal debt has greatly expanded. It is expected that the increase in the next 10 years will increaseAbout 14 percentage points of GDP.Similarly, the destruction effect of tariff measures and changes in monetary policy will take 12 to 18 months to fully appear.Therefore, political leaders and investors should think more about the economic situation at the end of 2020 when evaluating the effects of the current policy.This period happens to be in line with the upcoming presidential election cycle, not the excitement that is satisfied with the current financial market.
The US President's preference for politics is not new.The reason why this time is so different is that no sober men can be refuted.The National Economic Council, founded in the early 1990s, aims to act as an honest intermediary of the administrative department, organize and coordinate key political topics) has now been paralyzed.Larry Kudlow, who has always supported free trade, has been ambiguous to Trump's tariff measures and attacks on the Federal Reserve.The Republican Party, which has always supported trade liberalization.
Trump's reports overwhelmed the prudent economic policy mdash; mdash; completely ignored the lessons of history, rejected the analysis of modern economics, and destroyed the institutional integrity of the decision -making process.Large -scale policy errors have become the norm, not exceptions.The imminent consequences are not so easy to reverse.
(The author Stephen S. Roach is a teacher of Yale University in the United States, former chairman of Morgan Stanley Asia, and is the imbalance)
English Title: Trumps Art of the Spin
Copyright: Project Syndicate, 2019
