Trump’s Economy

Member Group : Lincoln Institute

The left’s war with President Trump is legendary at this point.  The left believes it is a war of government oversight, personalities and Twitter style whereas the President understands it is a philosophical war of ideology.

The President is transitioning back to an economy where economic risk is rewarded and the self-regulating nature of a free market system, within limits, works.  His is a classical view of economic theory of Adam Smith versus the controlled economic theory of Keynes and a central bank.

Modern economic theory of Keynes and the Hamiltonian approach of a strong central bank, the Federal Reserve, have not delivered since 2008 and for the past 40 years.  Trump is challenging those approaches and getting resistance from the deeply entrenched bureaucratic state whose very life is dependent upon government interference in markets.

The outcome of this economic system battle will impact all of us for decades to come. The unwillingness of the “system” to acknowledge that deficit spending, quantitative easing, and government over-regulation have not worked are at the root of the mounting crisis.

On election night 2016 stock market futures plummeted in reaction to the shocking election of Donald Trump.  The next day however the stock market gained over 250 points and hit a record high during the day.

Since that historic day in 2016 the stock markets, total employment, income levels, and labor force participation have improved to the best performance in over 50 years and yet Adam Schiff and Nancy Pelosi truck on to derail it.

What is a stake is the very future of our nation!  The economic problems worldwide and domestically at the Federal Reserve are profound.  Worldwide there is over $15 Trillion of negative interest rate debt.  In the United States, the Federal Reserve in late 2019 has started to once again interfere in the money markets under a misguided belief that current monetary policy is working.

Almost every commentator and financial expert note that markets hate uncertainty.  However, markets hate interference as much as they hate uncertainty. The election of Donald Trump marked the end of that uncertainty as well as the beginnings of the unraveling of excessive intervention in free markets.

During the first two years of the Trump administration, the regulatory burden on the US economy and renegotiating trade deals has had a very favorable effect on the creation of wealth as measured by the stock market, employment statistics and income growth.

Trump is advocating a classical view of economics, one in which the risk takers truly take risk on the upside and downside.  No effort is made in classical economics to “protect” the risk takers from loss or punish their gains.

Now the conundrum! Since the loss of the US House of Representatives to Nancy Pelosi the economy has slowed. The Federal Reserve does not know whether it is coming or going with raising and then lowering rates and interfering in the financial markets almost daily.  Equity market volatility has exploded.

Bubbles and panics happen in markets.  Intervention in markets by government happens occasionally.  The long-term effects of those interventions are not always so obvious.

All of us should be concerned that failing to allow the economy to stabilize through rational market forces will likely lead to an even more disastrous bubble bursting than in 2008.

If this economy becomes unraveled and it is in a precarious position, then Nancy Pelosi will have single-handedly led to one of the greatest economic debacles in recent history.

Make no mistake, the economy is still recovering from failed economic policies in this nation for the past 40 years. It is precarious while strong. It would not take much to derail this economic success.

The Federal Reserve’s actions of increasing and then decreasing interest rates are one thing. The re-regulation of the US economy after decades of massive interference from Washington DC is another.

In “modern” economics, fiscal and monetary policies are mentioned as the two primary tools available to government to stabilize an economy.

With his trade posturing and other economic policies, President Trump has opened a third prong to the economic arsenal of policies available to the United States with his decidedly different economic approach of Adam Smith.

The day of reckoning is coming.

What I do know for certain is that markets hate uncertainty and interference.  Having spent time in Poland in 1991 and Romania and Bulgaria in 1996, the feelings of euphoria of the masses when they swore off the leg irons of socialism and communism were electric.

We are truly at war with forces who believe in liberty and self-determination versus forces advocating government controls, interference and safety nets.

Unfortunately, the structural financial problems in an economy will never be fully resolved until all parties accept their personal responsibility and accountability for the crisis which ensued.

Frank Ryan, CPA, USMCR (Ret) represents the 101st District in the PA House of Representatives.  He is a retired Marine Reserve Colonel, a CPA and specializes in corporate restructuring.  He has served on numerous boards of publicly traded and non-profit organizations.  He can be reached at [email protected].