Former Treasury Secretary and Keynesian Larry Summers says it won't be well.
Below is the sound part of Summer's take on the current situation (with his crazy Keynesian analysis removed).
President Trump regularly and proudly takes credit for the U.S. economy’s strong performance. And with rapid growth during the second quarter, the stock market strong, the unemployment rate back below 4 percent and the midterm elections looming, Trump’s rhetoric and that of his supporters will probably escalate in coming months...Summers then goes on to become the ultimate doomsayer when he writes that a Trump recession "will be a test of our democracy."
[H]istory suggests that presidential popularity rises with declining unemployment. It is reasonable to suppose that, if unemployment was at its historical average of 5.8 percent, instead of the current 3.9 percent, Trump’s approval rating would fall lower than its already anemic level. As it is, he is less popular than any first-term president with an unemployment rate less than 5 percent...
This is all quite dangerous. The president has taken credit for far more economic success than he deserves. He will disproportionately be blamed when the downturn comes.
Summers is correct when he suggests that Trump will not act well in a recession. He may become FDR on steroids, when a Ronald Reagan shrug would be better. But the Keynesian Summers has a deeper point than he realizes. Trump could become a Keynesian like we have never seen before--and that would be a move that would shrink the Empire and cause economic havoc across the land for a very long period.
For sure an economic storm is coming, the exact timing will be up to the Fed. A Trump reaction is unlikely to be pretty. The last thing we need during a recession is a can-do president.
What we would need at such a time is signified by a term that probably isn't part of Trump's "billionaire of the people" vocabulary: laissez-faire. Trump runs more on what Mises would call the Führer Principle.
Trump under an economic downturn? Probably a Führer-lite Keynesian/
-RW
I don’t really agree with Summers’ analysis. Everyone’s so tribalized that zero Trump supporters will ever blame him no matter how bad things get, and zero anti-Trumpers will give him any credit no matter how good they get. Those few who aren’t in either camp are probably generally thoughtful enough to understand that the president has little impact on the business cycle, and will judge him more on his actions than on macroeconomic outcomes.
ReplyDelete1. I think Facebook has shown that facts, logic and evidence mean nothing to the partisan tribalists. Or to non-partisan tribalists.
Delete2. I think Trump's monstrous tariffs could start a cascade of loan defaults which might help the bust get going. If tariffs are so cool, why are there so many business victims in need of business welfare?
Spot on Rob and I dont think any of it will be a surprise to anyone. Even the Cheeto in Chief
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