Despite all evidence to the contrary, most voters in battleground states believe that former President Donald Trump would do more for the economy than President Biden in a second term.reflecting their belief in the Trump economy’s potential.

Polling Results and the Trump Economy

A new poll shows Trump leading in all swing states except Wisconsin (where Trump and Biden tie), with 56 percent of voters saying the former president would do a good job on the economy versus just 40 percent for Biden. 

The Reality of the Trump Economy

These voters are sadly mistaken. Trump’s first term and current policy proposals are dire warnings that a second round of Trumponomics would be devastating to everyday Americans. 

Trump Economy and Tax Cuts

Trump is promising to give big tax cuts to everybody, and to protect Social Security, Medicare and Medicaid. But the truth is that his proposed tax cuts will benefit the wealthy at the expense of low- and middle-income Americans, and he will cut entitlements to cover any lost tax revenues. 

Historical Lessons from the Trump Economy

We’ve seen this movie before. In 2016, Trump promised his tax cuts would favor working- and middle-class Americans. The cuts he delivered, however, favored the wealthy, widened income inequality, and encouraged massive tax fraud (which Trump may view as normal practice, given his own bogus tax write-offs). 

Impact of Trump Economy on Income Distribution

By the time they expire next year, Trump’s tax cuts are projected to have boosted after-tax incomes of the top 1 percent of earners by 3 percent, to an average of $2.1 million. But they barely affect the bottom 60 percent of earners, increasing their 2025 incomes just 1 percent, to $41,800.

Long-Term Effects of Trump Economy on Tax Savings

By 2025, average tax savings will amount to just $70 for the bottom 20 percent of earners, $61,090 for the top 1 percent, and $252,300 for the top 0.1 percent. If extended to 2027, the tax cuts would actually make low- and middle-income earners worse off.

Trump Economy and Federal Debt

Trump promised his tax cuts would pay for themselves by generating robust economic growth. But that never happened, so they ended up adding between $1 trillion and $2 trillion to the federal debt. 

Entitlement Spending and the Trump Economy

Republican leaders blamed this on Democrats for borrowing too much, and they use this talking point to push for cuts to Medicare, Medicaid and Social Security. Trump himself signaled openness to cutting entitlements before walking his comments back and promising to protect them. But unlike the party elites, most rank-and-file Republican voters actually want to expand them. 

Fiscal Challenges and the Trump Economy

Rising entitlement spending isn’t our real fiscal problem. In fact, the bipartisan Congressional Budget Office dramatically lowered its forecast for growth in healthcare costs. Our deficits are due primarily to Trump’s tax cuts. Extending them would add another $4.6 trillion to the federal debt, CBO found. 

Republican Proposals in the Trump Economy Era

Rather than confront that reality, the Republican Study Committee, which represents a majority of congressional Republicans, keeps proposing big cuts to Social Security. So when Trump vows to “never…hurt” entitlements, or that extending his tax cuts will benefit the majority of Americans and pay for themselves, voters would be ill-advised to believe him.  

Trump Economy and Tariff Impacts

Ditto for Trump’s claims about tariffs. He is threatening to slap new ones of at least 10 percent on the $3 trillion in goods we import annually. He insists exporting countries would pay for this, but it’s actually American consumers and businesses who would pay.

Effects of Tariffs in the Trump Economy

Universal 10 percent tariffs would cost U.S. households an average of $1,500 a year as companies raise prices to absorb them. They would trigger additional inflation, further increasing the cost of necessities like food, housing and healthcare, hitting working families hardest. And they’d endanger American jobs by hampering U.S. companies’ ability to compete. 

Trump Economy and Trade War Consequences

Trump’s 25 percent tariffs on imported steel and aluminum, for example, led to higher costs for U.S. manufacturers when Chinese suppliers cut their exports to the U.S. to avoid the tariffs. And when China switched to importing soybeans from the European Union, Argentina, Brazil and Russia, U.S. soybean exports plummeted by more than $10 billion. China also retaliated against Trump’s trade war by lowering tariffs on other trading partners to lure their imports away from the U.S.  

Donald Trump abandoned the Trans-Pacific Partnership, a proposed trade agreement among 12 Pacific Rim economies including the U.S. and, importantly, excluding China. The TPP would have eliminated 18,000 tariffs on made-in-America exports including every type of U.S.-manufactured product and most agricultural products. It would also have imposed stronger labor and environmental standards on Asia’s state-owned enterprises, leveling the playing field with U.S. businesses, particularly small businesses, which make up 98 percent of U.S. exporters and employ millions of American workers. 

Walking away from the agreement made imported goods from Asia more expensive for Americans, hampered our exports to the southeast Asia, and hit Americans’ wallets, lowering average U.S. incomes by $131 billion through 2030.  

By scuttling the TPP, Trump ceded the field to China, which stepped in and replaced the U.S. with a Chinese-led trade agreement among 15 Asia‐Pacific countries, boosting trade among them and offering them greater access to China’s vast markets. That left Washington with fewer enticements to convince other countries to adopt U.S. trading rules.  

Such perverse tax and trade policies are likely to lead to a recession, which in Trump’s hands could spiral into depression. Tax cuts and extensive tariffs deepened the Great Depression. But in the 1920s the U.S. was a major creditor nation, with the flexibility to borrow and provide liquidity and stimulus. Today Republican tax cuts have driven U.S. debt to 116 percent of GDP, hobbling our ability to engineer our way out of a crisis. 

Unlike Presidents Bush and Obama, who tapped highly qualified leaders to manage the recovery from the 2008 recession, Trump will avoid anybody who isn’t a sycophant or who has the backbone to disagree with him. Instead he’ll hire enablers who are likely to preside over a new crisis and find ways to profit from it while the rest of the country suffers. It will fall hardest on low- and middle-income earners who haven’t shared in the wealth Trump’s tax cuts generated for elites.  

The post Mad about the economy? Blame Donald Trump. first appeared on Inside The Political Chaos.

The global slowdown has arrived in America. The yield below the three-month treasury is above the yield on the ten-year treasury. Every time that’s happened since the 1970s, a recession followed.This global cooperation crisis highlights the absence of international support that could mitigate the economic impact.

The Global Cooperation Crisis and the Last Financial Crisis

Most CFOs worry that a US recession will hit before the 2020 election. If it does, the international cooperation between the US and other governments that prevented the Great Recession of 2008 from becoming another depression will be fatally absent. Donald Trump has alienated the allies we’ll need next time, and he’s hired inexperienced advisers instead of experienced experts.

The Impact of the Global Cooperation Crisis on Economic Recovery

Presidents Bush and Obama tapped Treasury Secretary Henry Paulson (formerly Goldman Sachs’ CEO), Fed Chairman Ben Bernanke and New York Federal Reserve Bank President Timothy Geithner to recover from the 2008 recession. All three were deliberative and experienced in dealing with economic and monetary policy.

The Global Cooperation Crisis: Trump’s Lack of Expertise and the Impact of Steel Tariffs

Trump is anything but deliberative or experienced. He launched his steel tariffs upon becoming “unglued” over matters unrelated to the wisdom of imposing tariffs. Neither Trump nor his Commerce Secretary, Wilbur Ross, arrived in America ever read a book on the modern economics of trade. The fortunes Ross’s steel and textile companies made from George W. Bush’s steel tariffs and import limits on Chinese clothing explain Ross’s eagerness to pummel other countries with tariffs. He was unaware of their consequences.

The Global Cooperation Crisis: Challenges to Trade and Policy

Ross’s international banking experience was as shareholder and Vice Chairman of the Bank of Cyprus which the US suspected of money laundering, being a tax haven for Russian oligarchs and helping them evade US sanctions. Ross also had a 35% stake in the Bank of Ireland and was accused of insider trading when he sold it.

The Global Cooperation Crisis: Mnuchin’s Inexperience and Its Economic Implications

Treasury Secretary Steven Mnuchin has little or no experience or known views of his own on monetary or economic policy. Former Treasury Secretary Lawrence Summers tweeted “Mnuchin may be the greatest sycophant in Cabinet history.”  Mnuchin even seemed unfamiliar with the provision established under the Dodd-Frank legislation to improve coordination among financial regulators. His principal qualification for his cabinet post was helping raise millions for Trump’s Presidential campaign.

How the Global Cooperation Crisis Affects Trump’s Financial Strategies

Fed Chair Jay Powell is the only Trump asset experienced enough to deal with a financial crisis. But Trump has repeatedly attacked him, comparing him to Chinese Chairman Xi as an enemy of the US. That doesn’t bode well for Trump giving Powell the necessary authority to act. If reelected and if he can legally fire Powell (which is unclear), Trump is certain to replace him with another sycophant.

With or without Powell, it’s doubtful Trump’s team could engineer a recovery from another recession like Paulson, Bernanke and Geithner did. Three weeks after the collapse of Lehman Brothers, the three of them coordinated announcements among the major central banks that they were lowering interest rates. The Fed and the European Central Bank cut their policy rate by 50 basis points. Even China was persuaded to join the US and other countries in cutting rates. Subsequently, the Fed and five other central banks jointly announced they would provide cross-border dollar liquidity through currency swaps, which were key to restoring financial stability and stemming a deeper crisis. All the governments involved praised the high degree of international cooperation.

The Global Cooperation Crisis: Erosion of Trust and Future Risks

But other countries won’t be eager to work with Trump. He’s alienated them and sowed distrust, leaving our relationships with them in tatters.

He chastised them for unfair trade practices in his UN address last week. He imposed tariffs without warning and abandoned and insulted a slew of multilateral organizations. He withdrew from the Iran nuclear deal, fracturing already-strained relationships with Europe. He berated and threatened to pull out of the World Trade Organization.  He exited the Trans-Pacific Partnership, a trade agreement with eleven Pacific Rim countries, damaging their trust in the US. He withdrew from the Paris accord, falsely accusing its signatories of disadvantaging the US.

Trump insulted our allies in the G-7 and NATO while openly adoring Kim Jong Un and Vladimir Putin. Nearly as many Germans (55%) think the U.S. is as much of a threat as Russia (56%). Only 27% said they feared North Korea more than the US, and only 16% said they feared China more. Seventy-two percent want German foreign policy to be more independent of the US.

America’s allies no longer believe American interests are aligned with theirs and are relying less on America. As Foreign Affairs magazine observed, “in the last two years, American hegemony died.”

The Global Cooperation Crisis and the Potential for Future Recession

Trump’s refusal to take advice, combativeness and inability to compromise will likely preclude his cooperation with other governments. It was that type of behavior that worsened the Great Depression. Governments raised tariffs to make exports cheaper and imports more expensive. waged currency wars (Trump has threatened to devalue the dollar). Like Trump, President Hoover ignored warnings of the dangers of tariffs, which economists blame for deepening the Depression.

In 1929 the US was a large creditor nation and the Fed’s discount rate was above 6%. We are now a debtor nation to the tune of a record $22 trillion and the Fed’s benchmark short-term rate is between 1.75% and 2%. So the US will have a tougher time borrowing to spend us out of a recession and lowering interest rates to stimulate growth.

Add Trump’s flawed character and the inexperience of his administration, and we have a lot to worry about.

The post In the Last Financial Crisis International Cooperation Saved the US. In the Next, It Won’t Be There. first appeared on Inside The Political Chaos.