Narayana Kocherlakota has a new post entitled, “Trump Starts Making Economic Sense”:
About a month ago, I urged the presidential candidates to explain what policies and leadership they would like to see at the Federal Reserve. So I was glad to see Trump address Fed-related issues in an interview with Fortune magazine last week.
His key comments: “We have to rebuild the infrastructure of our country. We have to rebuild our military, which is being decimated by bad decisions. We have to do a lot of things. We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.”
I read this as calling for two forms of fiscal stimulus.
That’s funny, I read the statement “we have to reduce our debt” as calling for austerity. Of course the second half of that sentence is a call for fiscal stimulus. I attribute the contradiction to either:
1. Trump having an IQ in the 80 to 85 range, or . . .
2. Trump being a shameless demagogue.
I would also point out that Mr. Trump was actually discussing fiscal policy, not monetary policy. That’s a distinction I worked really hard making in my economics classes, back when I taught at Bentley.
Another question is whether Trump would be comfortable with the Fed pursuing an inflation target higher than 2 percent (such as the 4 percent target suggested by Professor Larry Ball of Johns Hopkins University). This has been advocated as a way to give the central bank more ammunition to fight future recessions (by generating higher nominal interest rates, it would provide more space to lower them before hitting zero). But it would also give the Fed more room to support fiscal stimulus of the kind suggested by Trump.
I’m not quite sure what Kocherlakota is trying to say here. The whole point of raising the inflation target to 4% is so that you don’t have to use fiscal stimulus in the first place, not as a way of “supporting” fiscal stimulus.
Undoubtedly all these things that make no sense to me are perfectly clear in the mind of The Donald. Recall that Trump will pay off the national debt in 8 years, a “making sense” proposal that Kocherlakota does not comment on. Nor does he comment on the fact that Trump will achieve this miracle by shielding entitlements from cuts, sharply boosting spending on the military and infrastructure and reducing the top tax rate to 25% percent (all while raising taxes on “the rich”) and eliminating taxes entirely on 75 million Americans. What’s the secret sauce that will make this all possible?
PS. People have offered three explanations for the rise of Trump, struggling blue-collar workers, trade and immigration. All three are false. The Economist reports that Trump voters are skewed toward the over $100,000 group. A new poll shows surging support for the claim that immigrants help the country. And other polls show surging support for the view that trade is an opportunity, not a problem.
Sorry Pat Buchanan, the rise of Trump is not about your issues—it’s not about Making America Great Again. He’ll drop your issues the day he takes office. It’s about Making Donald Trump Great Again.
PPS. People think I’m exaggerating when I compare Trump talk to a baby’s “ga ga” talk. I’m dead serious. Read this sentence 100 times in a row, until you have it figured out:
We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.
Yes, reducing the debt by borrowing more would be amazing.
I know words, I have the best words
Yes, Trump has some excellent words. But he does not yet have sentences with meaning. He needs to work on that before becoming President. Not just words, words that are grouped together to produce meaning.
Just once, I’d like to hear Trump say:
I am familiar with many terms, I possess a quite sophisticated vocabulary.