Promises Kept
Trump promised to close America’s open borders and he has: illegal daily border crossings are at a 15-year low. He promised to rescue America’s culture from elitists who have replaced merit with ethnicity as the ticket to advancement and he has: government and private sector institutions, most notably diversity enthusiast Black Rock, which has $11.5 trillion under management, are erasing references to diversity. He promised to pare the size of government by firing redundant bureaucrats and he has: Elon Musk is taking a chainsaw to several agency rosters.
Promises Not Kept
He promised to bring prices down on Day 1, and he – hasn’t: inflation seems to be running at a 3 per cent rate, and house prices rose by 3.9 per cent in December to its 19th consecutive record high. He promised to produce an economy booming like none ever before, and he hasn’t: in January retail sales recorded their largest drop in two years, and uncertainty is increasing the probability of a recession. He promised to do much of this on Day 1, and hasn’t. The President has responded by replacing his Day 1 target with what radical Joe Hill called in 1911 “the sweet by and by” – ending the deficit, now running at 7 per cent of GDP “this year or next year … or the year after.”
Up Go Prices
Meanwhile, almost every one of Trump’s plans is likely to increase inflation. Higher tariffs promised for tomorrow will almost certainly produce a jump in prices of imports and some domestic products – unless cancelled. Tax cuts and spending increases will add to inflation-producing deficits. Little wonder that consumers are expecting inflation to run at an annual rate of 6 per cent next year and 3.5 per cent over the next five years, the highest longer-term level expected since 1995. Elevated expectations induce workers to seek higher wages, and businesses to raise prices in anticipation of higher costs for labor and supplies, making the expectations a self-fulfilling prophesy.
Comes A Slowdown With Consumers and CEOs Worried
There is worse for the President. Financial services firm S&P Global reports that business activity has slowed to a 17-month low, with the service sector contracting for the first time since September 2023. New home starts in January dropped 10.5 per cent. The Conference Board’s consumer confidence index fell in February for the third straight month and by the largest amount since August 2021. The University of Michigan consumer sentiment survey found that “People are feeling less confident” about their personal finances and business conditions, with 40 percent mentioning tariffs as a source of concern. Surveys show that about 80 per cent of Gen Z adults (upper teens-30s) and Millennials (30s-early 40s) are planning to cut spending in the next few months, and the top ten percent of earners who account for 50 per cent of all spending might decide they have a sufficient supply of Birkin handbags if uncertainty continues its upward trend.
Consumers are not the only ones getting nervous. The Economic Uncertainty Index hasn’t reached this level since the pandemic was raging. Warren Buffett is sitting on a record $321 billion of cash – out of $1.8 trillion in assets – for want of investment opportunities. Mighty Walmart, America’s largest grocer, sees its growth slowing. Many homebuilders, unable to guess at what tariffs will do to the cost of lumber and deficits will do to interest rates on mortgages, concur, and are sitting on undeveloped acreage. Ken Griffin, whose Citadel Hedge Fund has $63 billion in assets under management, complains, “…it’s a difficult time to invest because of the policy uncertainty…”.
Treasury secretary Scott Bessent warns that the economy is “more fragile under the surface than economic metrics suggest” because of interest rate volatility, sticky inflation and job growth that has been dependent on the government, which presumably has become a source of job cuts.
Trump Headed For Problems Or Praise
A Gallup poll taken in the first weeks of February: 45 per cent approve, 51 per cent disapprove of the way Trump is doing his job. Only 42 per cent approve of his management of the economy, with 54 per cent disapproving. Leading James Carville, a wise old Democratic war horse, to conclude, “The administration is in the midst of a collapse” and will implode in 4-6 weeks.
Not quite. For one thing, as Carville knows but his Democratic colleagues do not, Trump is blessed with an opposition that continues to espouse many of the cultural ideologies that do not play well outside of California, has elements opposing the deportation of illegals charged with crimes by forewarning them of impending ICE raids, and still presses to make petrol-powered vehicles illegal, and soon.
For another, some of the Trump reforms might start to take hold. Tax cuts will prove popular. Tariffs will be finalized, reducing policy uncertainty. Planned tax incentives will produce a flood of job-creating inbound investment. The guns go silent in Ukraine. Musk discovers a heart almost as large as his brain as he proceeds with shrinking the government.
All in time for the mid-term elections, a mere twenty months from now, with jockeying for position already under way and the orders placed for champers for Mar-a-Lago.