Why the stock market likes Trump

If I think that Trump’s policies would be bad for the economy, then how do I explain the recent strength in the stock market?  My answer is that stock investors see signs that Trump will not enact his economic agenda, and instead will govern more like a Mitt Romney Republican.  I hope they are right.

Yahoo.com has an article that fleshes out this argument:

4 Ways Trump’s economic plan is already morphing

Fewer tax breaks for the wealthy. Trump’s tax plan during the campaign included a huge tax cut for the wealthy, on the supply-side principle that they’d spend more and help create more jobs. In October, the nonpartisan Tax Policy Center estimated that Trump’s plan would save the top 1% of earners an average of $215,000 per year, while middle earners would only save $1,000 or so. . . .

That no longer seems to be the plan. Steve Mnuchin, Trump’s nominee for Treasury Secretary, said recently there will be “no absolute tax cut for the wealthy.” What he means by “absolute” is that tax rates will still come down, perhaps according to Trump’s original plan, which would lower the top rate from 39.6% to 33%. But Trump would also put new limits on the amount of deductions filers can claim, and the wealthy tend to claim far more deductions than other filers . . .

A softer touch on trade. Trump talks tough about punishing trade partners if they don’t help create more American jobs, but Trump’s nominee for commerce secretary, Wilbur Ross, is far more diplomatic. He recently told Yahoo Finance, “there aren’t going to be trade wars,” . . .

A lower infrastructure target. The Trump campaign plan called for $1 trillion in new infrastructure spending. The target has now been cut to $550 billion, according to Trump’s transition web site. . . .

Janet Yellen is okay after all. Trump strongly suggested that if elected, he’d replace Yellen as chair of the Federal Reserve, arguing that she had politicized the central bank by favoring the policies of President Obama. But Mnuchin and Ross both praised Yellen after receiving their cabinet appointments, reflecting the view of much of the business community that she has been a steady hand on the economy during turbulent times. So expect no fireworks at the Fed. Trump has plenty of other battles to fight.

This last point is something I predicted a few weeks back.  The Trump people will have their hands full on other issues, and I doubt they’ll see any reason to take on the Fed.  In addition, if they did go after the Fed with legislation, the GOP Congress would come out with something hawkish.  It would not even get through the Senate.  More importantly, the Trump people don’t want a hawkish policy, as they are going all out for stimulus.  So why would they replace Yellen with John Taylor, or some other plausible choice.  And obviously Trump is not going to pick someone to the left of Yellen, like Christina Romer.  I suppose he might pick an obviously corrupt person, but there’s much more spotlight on the Fed than back when Arthur Burns was picked.  Someone transparently subservient to Trump would lead to a massive fight on Capital Hill.  I think we should expect about the same monetary policy under Trump as we had under Obama, give or take a bit due to incompetence.

BTW, the list above does not include deregulation expected under Trump, which is also a factor driving stocks higher.  Of course all of this remains to be seen.  And note that the sort of conventional policy mix described above will not bring back blue color jobs, or lead to sustained 4% GDP growth.  Trump’s also picking the same sort of foreign policy hawks that Marco Rubio would have picked, albeit a bit loonier.  So America was dragged into the gutter for 12 months, turned into a Philippine-style banana republic, to give us roughly what a Mitt Romney clone would have provided?

Off topic, Lorenzo from Oz always tends to leave some of the most thoughtful comments.  Here’s an excerpt from a couple of very interesting remarks that he left after the previous post:

If this is the new gilded age, then The Donald is leading us to a Republican Party that looks like its gilded age equivalent — the Party of the northern working class, protection and assimilation. The Democrats don’t seem to have noticed that their period of dominance (1930-1972) was based on a low migration period (1920-1965) when convergence of norms and expectations made Washington-based expansive programs look sensible. The more diverse the society gets, the less and less plausible trust-Washington-competence looks. (With its Northern charm and Southern efficiency, as JKF called it.)

The previous period of high migration (to 1920) was a period of Republican dominance. The more diverse the society gets, the more appeal the politics of national identity but central government reticence. (Austrian economics was born in the Danubian Monarchy, the most wildly ethnically diverse of the major Powers: not an accident methinks.)

Polls regularly show very low popular confidence in the US Federal Government and steadily trending downward trust therein. Yet the Democrats keep pushing that this increasingly distrusted level of government should do more and more and the society should become more and more diverse. Methinks there is some contradiction in their politics …


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49 Responses to “Why the stock market likes Trump”

  1. Gravatar of psummers psummers
    3. December 2016 at 07:28

    Scott,

    I hope “they” are right too, but see James Kwak on the feasibility of Mnuchin’s “no absolute tax cut”: https://baselinescenario.com/2016/12/02/more-on-the-deduction-fairy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29

    PS

  2. Gravatar of rtd rtd
    3. December 2016 at 08:41

    Aren’t you reasoning from an administration change?

  3. Gravatar of Daniel Daniel
    3. December 2016 at 08:50

    Oh good, the Trump derangement syndrome is over.

    I can go back to enjoying this blog.

  4. Gravatar of Major.Freedom Major.Freedom
    3. December 2016 at 09:50

    Lorenzo wrote:

    “The more diverse the society gets, the more appeal the politics of national identity but central government reticence. (Austrian economics was born in the Danubian Monarchy, the most wildly ethnically diverse of the major Powers: not an accident methinks.)”

    Ugh, such bigotry and ignorance. I am not surprised Sumner favorably quoted this drivel.

    It is statements like this that prove time and time again that the critics of Austrian economics have no clue what it is about.

    Lorenzo, the mere presence of the term “Austrian” in the name of the school, was not borne out of any “nationalist” furvor or politics from its originators. The term Austrian economics was actually a name that came from without, from the rest of the economic establishment which was predominantly what we now call “classical”. The term “Austrian” was given because there was no formal lexico-semantic term available to describe the ideas of the economists at the university of Vienna during the 1870s and 1880s. The mainstream called these new ideas “Austrian” because that is the country where the school happened to be located, and the classicals thought primarily in terms of nations, per Adam Smith.

    Moreover, the theory itself was not nationalistic. Ironically for you, the birth of subjectivist economics was in contrast to the established classical economics which was in fact nationalistic (Adam Smith’s Wealth of Nations was not just a theory with the name Nation in it, it was a theory of the economic health of nations. Mercantilism, etc).

    Carl Menger’s subjectivist economics was not, contrary to your insinuation, some sort of bigoted “rationalization” of political drives to unification through nationalism to stop “diversity”. Egads, you are taking the very recent SJW propaganda and projecting it to the distant past. That is called historical revisionism through a changed theory. Happens all the time. In fact, subjectivist economics theory was driven by the repeated failures of classical economics to explain the price-value problem. Not only that, but what is now called “Austrian” economics, I.e. subjectivist economics, was independently “co-discovered” by Williams Jefons, who resided in England, and somewhat later, but also independently, by Leon Walras, who was French.

    England and France during the 1860s, when the theories were likely first formulated before going public. Ethnically diverse you say?

    See what you are doing, Lorenzo, is presupposing the old Marxist script that economics theories reside in the “superstructure” level of phenomena. Where economic theories are more hollow and serve really to excuse and justify the “materialist” or “class” conditions. Tut tut, you say, Austrian economics is an excuse to rationalize the bigoted reaction to SJW diversity and moral relativism.

  5. Gravatar of AL AL
    3. December 2016 at 10:13

    I checked through Trump’s disclosure list to see whether he owns any of the same stocks I do. He does. I felt a momentary flash of relief…and then I wondered how we all suddenly got stuck in Bizzaro land.

    The stock market tracks expected near-team corporate profits, not broad humanity futures. Important difference.

  6. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    3. December 2016 at 10:48

    ‘…but see James Kwak….’

    Speaking of innumeracy;

    https://baselinescenario.com/2016/12/02/economics-101-economism-and-our-new-gilded-age/

    ‘Income inequality is at levels not seen for a century. Many working families are struggling to get by, only kept afloat by Medicaid and food stamps. The federal minimum wage is just $7.25 per hour—below the poverty line even for a family of two. The bright outlook for corporate profits has driven the S&P 500 to record levels. Surely it makes sense to raise the minimum wage, forcing companies to dip into those profits to pay their workers a bit more.’

    A howling non-sequitur, if I ever saw one.

  7. Gravatar of dwb dwb
    3. December 2016 at 11:06

    So yahoo.com is a good source now for what drives the markets? eyeroll.

    Trump is a Rorschach test. Most people are failing miserably**.

    Deregulation of banks and the energy sector, lower taxes and/or tax reform, scaling back Obamacare, and the so-called Penny Plan to reduce the federal deficit. What is not to like?

    So America was dragged into the gutter for 12 months, turned into a Philippine-style banana republic, to give us roughly what a Mitt Romney clone would have provided?

    An election featuring rumors of affairs, accusations of health problems, war mongering, rumors of undue influence by foreign immigrants and election fraud, and suggestions one party was aristocratic, elite and undemocratic!

    oh wait, that was 1800 when Adams accused Jefferson of being the son of a half breed Indian squaw.

    Americans like their politics bloody and rough, since 1800. Mittens Romney never fought back. He had his tail between his legs afraid of Democrat’s identity politics. He was an investment banker running after a financial crisis. He should have owned up to being a capitalist. His campaign is now viewed as an apology tour.

    ** You fail a Rorschach test by not recognizing the difference between a mountain of evidence and confirmation bias. Most people, especially academic economists, are failing.

    Most bloggers are falling into the same hubris trap as Krugman: Assuming technocrats know better and people voted against their self interest, or that markets are rising because “stock investors see signs that Trump will not enact his economic agenda.” lol. Just looking for proof they were right all along. Unfortunately, many people are rooting for Trump to fail because if he succeeds, they were wrong, and their credibility is shot. Even more unfortunately, economic policy debates has become more like religion and ideology. Why I don’t participate much any more.

    Economists who survive Trump will not be the “I told you so” ones. They will be the ones willing to take a more pragmatic view, take some risks, if only in the name of grand policy experiments.

    Nope, sorry, I am rooting for Trump to have wild success bringing capitalism in vogue again. Which I think he will.

    As for why the markets are up – internal forecasts for growth are up. Deregulation of banks and the energy sector, tax reform, and scaling back Obamacare has something to do with that.

  8. Gravatar of Bob Murphy Bob Murphy
    3. December 2016 at 12:29

    Scott, if I didn’t keep commenting on your Trump posts, you wouldn’t respect me, so…

    I am pretty sure there were lots of time over the last 18 months where exchanges on your blog went like this:

    =========
    SUMNER: omg! Trump just supported Crazy Policy X.
    E Harding: Actually, policy X is awesome.
    Other Trump fans: Scott, stop being so dramatic. Trump is just trolling the media. If he wins, he will surround himself with good advisors and we’ll see good policies.
    SUMNER: E Harding, I know you’re a Nazi. Everyone else, you’re nuts. Trump is a con man, and if you trust him to pick good advisors, you’re all as crazy as E Harding.
    =========

    Do you deny that that sort of exchange ever happened Scott?

    More generally, it seems you’re setting up a tails-Trump-critics-were-right, heads-Trump-fans-were-wrong kind of game here. If Trump does something nutty, you will say, “See? I told you so.” If Trump does something awesome, you will say, “Ha ha you idiot Trumpsters, he conned you. You voted for him, hoping he would do something terrible.”

    That’s fine if that’s the way you want to proceed, but I get the sense you think you’re being empirical.

  9. Gravatar of Bob Murphy Bob Murphy
    3. December 2016 at 12:33

    From the quoted article:

    “Trump’s tax plan during the campaign included a huge tax cut for the wealthy, on the supply-side principle that they’d spend more and help create more jobs.”

    I wonder how they would describe a demand-side principle?

  10. Gravatar of ssumner ssumner
    3. December 2016 at 13:26

    Daniel, You said:

    “I can go back to enjoying this blog.”

    On the contrary, I haven’t even begun to make people like you suffer for your sins. Much worse is ahead.

    dwb, You said:

    “So yahoo.com is a good source now for what drives the markets? eyeroll.”

    Read my post again, I never relied on Yahoo as a source for what moves the markets.

    You said:

    “As for why the markets are up – internal forecasts for growth are up. Deregulation of banks and the energy sector, tax reform, and scaling back Obamacare has something to do with that.”

    Talk about Rorschach tests, I say stock markets are up because markets like Trump’s likely economic policies, and then you say I don’t know what I’m talking about—stock markets are up because they like Trump’s likely economic policies. Okaaay.

    Bob, No, you have it all wrong, here’s what I actually said:

    1. I have no idea what Trump will do. I still don’t. Whatever he does, I won’t be wrong.

    2. I said if his proposed policies were adopted, it would be a disaster. I still say that. If they are adopted and succeed, then I’ll say mea culpa.

    3. I said he would not pick good advisors. His first picks (Bannon, Pompeo, Flynn, Sessions, etc.) are horrible, I’d think even more so for libertarians like you. However there will be a few good advisors, because a President must pick so many people that he’ll inevitably rely on more competent people like Pence and . . . well, anyone is more competent than Trump.

    4. My opposition to Trump was never predicated on the assumption that the economy would have grown faster under Hillary, it was based on the fact that I don’t like Duterte’s policy of murdering thousands of his own citizens and threatening to murder millions more, and I don’t like the fact that we have a President elect who just a day ago told Duterte that he approves of this war on drug users. Maybe other people don’t care about those sorts of things, as long as they get a capital gains tax cut. I do.

    5. As for public policy decisions, I will call them as I see them, praising Trump’s policies whenever they improve things. I may well praise many of his economic policies, but that won’t change my view that he’s a despicable president.

    Lots of my readers have trouble with reading comprehension. That’s their problem, not mine.

    If Trump succeeds in promoting a sound economy without bringing back those blue collar jobs or kicking out the immigrants, then I will ridicule the fools who believed in him. If he fails and the economy goes into recession, then I will ridicule the fools who believed in him. If he gets us into a war through incompetence, then I will ridicule the people who believed in him.

    If people saw through Trump, and voted for him anyway as the lesser of evils, and he does fine, then I won’t ridicule those people.

  11. Gravatar of Major.Freedom Major.Freedom
    3. December 2016 at 13:42

    Sumner wrote:

    “As for public policy decisions, I will call them as I see them, praising Trump’s policies whenever they improve things.”

    Any room in your dictatorial mentality for individuals to decide for themselves what does and what does not improve their own circumstances?

    Your judgment does not apply to anyone but yourself.

  12. Gravatar of dwb dwb
    3. December 2016 at 15:12

    I am looking at the following: “My answer is that stock investors see signs that Trump will not enact his economic agenda, and instead will govern more like a Mitt Romney Republican.”

    Trumps economic plan has always been the same as I wrote above: Deregulation of banks and the energy sector, lower taxes and/or tax reform, scaling back Obamacare, and the so-called Penny Plan to reduce the federal deficit.

    If you don’t think so, you have been distracted by sex tapes and too many out of context quotes on the Clinton News Network.

    I do hear what people are saying on trade policy. But, voters are clamoring to close the trade deficit one way or the other. Interestingly, I looked up the state-level details from the BEA on foreign direct investment, and for 2014 and 2015 about 2/3 goes to CA, MA, NY, NJ, IL, and other “blue” states that went for Clinton. CA alone grabs about 30%. The states that went for Trump are losing jobs, and not feeling the love from foreign investment either. The states that went for Clinton are getting cheap goods and foreign investment. Shocker, the midwest and rust belt voted to change trade policy. If you are surprised, you have been spending too much time in your Never Trump safe space.

    I know how Trump thinks: He is going to fix it (trade deficit), he’s willing to take risks and try various things, and a bad idea (tariffs) is better than no idea. If it were me, I’d deregulate the energy sector, dig up coal, oil, and natural gas, and sell it to the Chinese. Which by the way creates “blue collar” jobs. I would build out deepwater ports that can take the biggest ships, and improve railroads to haul commodities to port. I would also reduce labor regulations and reform taxes.

    Coincidentally, a lot of the ingredients are already in the Trump plan, and he often talks about the need for better ports.

    And, you should know better than to predict Trump is going to cause recession! Since 1980, every time (except one) the Fed has embarked on raising rates, a recession ensues. Since 2007, Fed forecasts have over-predicted economic growth, leading to too tight monetary policy. Maybe we’ll get lucky and for the next 8 years they will undershoot and we’ll get a boom.

  13. Gravatar of Ray Lopez Ray Lopez
    3. December 2016 at 16:34

    Bob Murphy is of course right: Sumner did an about face on Trump. A slight of hand Sumner is good at.

    I’ve not been reading this blog much (and haven’t missed much I see) but when did Sumner say this: (Sumner) “4. My opposition to Trump was never predicated on the assumption that the economy would have grown faster under Hillary, it was based on the fact that I don’t like Duterte’s policy of murdering thousands of his own citizens and threatening to murder millions more, and I don’t like the fact that we have a President elect who just a day ago told Duterte that he approves of this war on drug users. Maybe other people don’t care about those sorts of things, as long as they get a capital gains tax cut. I do.”

    Yawn. I live in the Philippines (I’m in Greece at the moment taking care of business) and Duterte is viewed as a buffonish populist over there, whose rhetoric has allowed rival gangs to bump off competitors with impunity, and one general effect is the price of pot (says a guy I know) has gone up ‘ten fold’ (his words, not sure if that’s accurate). For now, that’s the only really bad effect. Once things ‘die down’ (no pun) it will probably be business as usual. Reliable rumor has it that Duterte runs his own rackets, non-drug but vice related (sorry I’m not sure if this rumor is in the public press so I can’t be more specific) and hence essentially Duterte is a stationary bandit like Norega (but without the drugs). His crime program in Davao apparently for the wider city did not reduce crime much. I personally keep my mouth shut when in the PH since I could get deported for talking politics, but essentially Duterte is, at the moment, a non-entity who is popular with the poor and uneducated (analogous to Trump) since he promises to upset the status quo. And yet Sumner is concerned? Over a country of 100M whose GDP is about that of Greece, a bit more, or about that of greater Atlanta? Please. Sumner is concerned over nothing, not unlike his concern over monetary policy (since money is largely neutral, see George Selgin’s recent blog posts at Alt-M–not to be confused with Alt-R)

  14. Gravatar of Bob Murphy Bob Murphy
    3. December 2016 at 17:09

    Scott,

    I realize you’re fighting an n-front battle in the comments here, so some leeway is in order. But when you say I’ve totally misconstrued your position, and then state it in (what seems to me) nonsense terms, I have to take another swing.

    You wrote: Bob, No, you have it all wrong, here’s what I actually said:

    3. I said he would not pick good advisors. His first picks (Bannon, Pompeo, Flynn, Sessions, etc.) are horrible, I’d think even more so for libertarians like you. However there will be a few good advisors, because a President must pick so many people that he’ll inevitably rely on more competent people like Pence and . . . well, anyone is more competent than Trump.

    OK, so stop right there. You said he would not pick good advisors, and now you are saying the market is up 4% (or whatever) because the market is reading moderate statements from two of Trump’s picks.

    So you were totally wrong on this point, right?

    4. My opposition to Trump was never predicated on the assumption that the economy would have grown faster under Hillary, it was based on the fact that I don’t like Duterte’s policy of murdering thousands of his own citizens and threatening to murder millions more, and I don’t like the fact that we have a President elect who just a day ago told Duterte that he approves of this war on drug users. Maybe other people don’t care about those sorts of things, as long as they get a capital gains tax cut. I do.

    Your opposition to Trump all along was that you predicted what he would do in December 2016? That’s freaking amazing.

    Let me be generous and assume you mean, “My opposition all along has never been to Trump’s actual *policies*–for all I know, he will better govern than Hillary Clinton. Rather, my opposition has always been that he says really horrible things.”

    OK, is that really your position? I think most people would say, “I’d rather have a president who implements good policies and says mean things, than one who implements bad policies but is very polite to all groups of people.”

    I realize you are going to say I misunderstood your remarks, but I really think I’m literally quoting you and responding to what you typed. Not sure what else the innocent reader is supposed to do here.

  15. Gravatar of Britonomist Britonomist
    3. December 2016 at 18:07

    “OK, is that really your position? I think most people would say, “I’d rather have a president who implements good policies and says mean things, than one who implements bad policies but is very polite to all groups of people.””

    What possible reason could a liberal or libertarian have to think Trump will implement good policies? It’s literally only possible if you think he has been lying consistently throughout his whole campaign, that all of the terrible policies he’s promised won’t occur. Which begs the question of why it’s worthwhile to elect a sociopathic liar in the first place?

  16. Gravatar of E. Harding E. Harding
    3. December 2016 at 18:24

    “it was based on the fact that I don’t like Duterte’s policy of murdering thousands of his own citizens and threatening to murder millions more, and I don’t like the fact that we have a President elect who just a day ago told Duterte that he approves of this war on drug users.”

    -Gimmee a break. Any other president (other than Obama) would have done exactly the same. If Trump had done the opposite, you would have lambasted him for alienating a strategic ally. If Hillary had done the same, you’d have praised Her for being a wise leader. That’s just the way you are.

    “Maybe other people don’t care about those sorts of things, as long as they get a capital gains tax cut. I do.”

    -No, you don’t, Scott, you scum. You supported Hillary Clinton over Trump. You don’t care the least bit about the suffering of the Syrian or Filipino people, or any other people outside or within the United States.

  17. Gravatar of B Cole B Cole
    3. December 2016 at 18:36

    Hands off Arthur Burns! Real GDP expanded by 20% in the four years after the 1975-6 recession.

    The Bernanke-Yellen record is Japanitis.

    OT but I like Trump directly talking to any foreign leader who calls, including Taiwan, and telling them how great they are.

    Trump may do better on foreign policy than Anyone since Clinton. The establishment foreign-military community has ossified arrogance into an edifice.

  18. Gravatar of E. Harding E. Harding
    3. December 2016 at 18:38

    “What possible reason could a liberal or libertarian have to think Trump will implement good policies?”

    -He was the only GOP presidential candidate to explicitly support the Russian intervention against the Islamic State, say the Iraq War was based on lies, say that George W. Bush did not keep the U.S. safe, to be open to a continued opening of U.S.-Cuba relations (this was later renounced due to his desire to win the Cuban vote) and to be open to the recognition of Russia’s reunification with Krim.

    That’s good enough in my book.

  19. Gravatar of Britonomist Britonomist
    3. December 2016 at 18:43

    “He was the only GOP presidential candidate to explicitly support the Russian intervention against the Islamic State”

    How does Russia indiscriminately carpet bombing syria align with liberal or libertarian values?

    “ay the Iraq War was based on lies, say that George W. Bush did not keep the U.S. safe”

    Pandering fluff, not policies.

    ” be open to the recognition of Russia’s reunification with Krim. ”

    Again, how does this align with liberal or libertarian values? If you’re a neoconservative or ‘realpolitik’ conservative, don’t pretend to be liberal or libertarian.

  20. Gravatar of Ricardo Ricardo
    3. December 2016 at 20:16

    Here’s probably another reason equity markets rose on Trump. From Bill Gross Investment Outlook Nov 2016:

    “Trump policies also appear to favor the repatriation of trillions of dollars of foreign profits at extremely low cost under the logic that the money will be spent for investment here in the U.S. Doubtful. The last time such a “pardon” was put into law in 2004, no noticeable pickup in investment took place. Of the $362 billion that earned a “tax holiday”, most went to dividends, corporate bonuses, and stock buybacks…”

  21. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    3. December 2016 at 21:08

    “What possible reason could a liberal or libertarian have to think Trump will implement good policies?”

    Promising to repeal Obamacare would be one.

    Consider what is required of supposedly free citizens under its provisions. You have to inform the ‘Marketplace’ insurance providers–if you buy one of their policies and qualify for subsidies to pay for it–of ANY change in your life circumstances that might affect your Advance Premium Tax Credit.

    ANY change in your income, your job, your residence, your marital status, the size of your family (even if you or your wife becomes pregnant). Remember when liberals said they wanted the government out of the bedroom?

    Obamacare is saturated with such indignities against free citizens of a republic.

  22. Gravatar of Bob Murphy Bob Murphy
    3. December 2016 at 21:42

    Britonimist wrote:

    What possible reason could a liberal or libertarian have to think Trump will implement good policies?

    Are we in the Twilight Zone? The whole point of this post is Scott trying to explain why the markets are (apparently) predicting a much better economy under Trump than under Clinton.

    I can understand you saying, “I disagree,” but you’re saying you can’t even imagine? How about:

    ==> Repeal ObamaCare
    ==> Open up domestic energy development
    ==> Get rid of EPA restrictions on coal-fired power plants
    ==> Massive tax cuts
    ==> Don’t start WW3 with Russia

    And as I said to Scott in my comments above–which you must have read because you were quoting me in your incredulous response–throughout the campaign, plenty of Trump supporters were laughing off his “insane” comments, saying he was trolling the media to get free publicity. E.g. Scott Adams, the Dilbert guy, made a new career for himself publishing such analyses for the last 18 months.

    So sure, you can say you disagree etc., but I think it’s odd when plenty of people were saying Trump would implement good policies (certainly compared to Clinton), while his critics said (a) he would lose in a landslide, particularly because of backlash from minorities and (b) if he somehow won, it would be Great Depression. Then Trump wins, and gets more votes from minorities (several metrics) than Romney or McCain, and the stock market–Scott’s preferred crystal ball–says his policies at least economically will be very good (compared to the original trajectory which assumed Clinton).

    And now, after all this, the anti-Trump people are still saying, “Ha ha, we told you so, what possible reason could anyone like this guy”?

  23. Gravatar of Bonnie Bonnie
    3. December 2016 at 21:43

    The in-office morality rate of presidents who won without the popular vote is likely coincidental.

  24. Gravatar of Don Don
    3. December 2016 at 21:44

    Kudlow is a Trump advisor and a supply-sider. Trump will use dynamic scoring and phased out deductions to claim tax cuts for wealthy are revenue neutral. Rates will be reduced.

    The real fight for the Fed is not over 1/4 point rate hikes, but with appointments. There may be 5 in the next 3 years.

  25. Gravatar of B Cole B Cole
    4. December 2016 at 00:59

    He (Trump)lso groused about the reaction to the call: “Interesting how the U.S. sells Taiwan billions of dollars of military equipment but I should not accept a congratulatory call.”

    You know, this guy Trump could be interesting.

  26. Gravatar of ChrisA ChrisA
    4. December 2016 at 04:30

    Maybe the rally is just that the Republicans held both houses. I am imagine investors were worried about a wipeout of the Reps in the House with the Democrats being boosted (as seemed likely in the polls) by anti-Trump voters. With the anti-market bias of the Democrat foot soldiers I would have imagined a few bones would have to be thrown to them by the elected politicians.

    My hope is that Trump works only on trivial stuff, that gets lots of newspaper headlines, and leaves all the more important things alone. I can’t see for instance Trump being very effective in calling up congressmen to jawbone them into supporting an invasion of some middle eastern country, he just isn’t a serious enough person to care about such things enough. If the US were facing some existential crisis that might be a worry, but despite all the hyperventilating about Islamists and Putinists, there really isn’t one. So let him do his circus act.

  27. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    4. December 2016 at 08:20

    https://finance.yahoo.com/quote/IWM?p=IWM

    IWM was impressive

  28. Gravatar of ssumner ssumner
    4. December 2016 at 09:21

    Bob, You said:

    “So you were totally wrong on this point, right?”

    No, I was right. And I don’t think we are going to get anywhere if you keep mischaracterizing my views. Do I really have to remind people that the German market rose under Hitler?

    Let’s make it simple. You provide the exact quote. Tell me what you think it means. And I’ll tell you what I actually meant.

    Regarding the Duterte comment, that was just an example of the sort of thing I object to–Trump’s support of murder.

    My opposition to Trump is based on many factors. I said I don’t like his racism and nationalism and xenophobia. I don’t like his promise to boost government spending. I think he was more likely to get us into nuclear war than Hillary (although the odds of nuclear war are still under 1% under Trump.) I don’t like his views on global warming. I don’t like his views on the Baltic states. I don’t like his views on criminal justice. I don’t like his views on immigration. I don’t like his views on foreign investment. I don’t like his views on Putin. I don’t like his views on abortion. I don’t like his views on the war on drugs. I don’t like his pathological lying, which tends to corrode and debase our political system over time.

    I don’t like his taste in interior design, or the way he styles his hair. I could mention 1000 things I don’t like about him.

    I realize that this complexity is far too nuanced for most of my commenters to understand. They want it all boiled down to a single sound bite. Read Ray’s comments if you want to see a typical example of my moronic Trumpista commenters.

    You said:

    “Massive tax cuts”

    Are we to assume that libertarians now support Trump’s call for massive tax cuts, combined with massive increases in government spending? Is that now a libertarian view? Didn’t libertarians used to object to trillion dollar budget deficits?

    dwb, You said:

    “And, you should know better than to predict Trump is going to cause recession!”

    I never once claimed that Trump would cause a recession. Not once. But this is typical of the comments I get from Trumpistas, who are dumb as doorknobs.

    This is the second straight time you mischaracterized my views. Make it three and I’ll start ignoring you.

    Harding, You said:

    “Russian intervention against the Islamic State”

    Is this some kind of joke? Putin is intervening against IS? Actually he is supporting Assad, who is far, far more murderous than IS. But Trumpistas don’t care about those things.

    Ricardo, I agree.

    Patrick, His promises on health care are so contradictory that no one knows what he will do. I predict that libertarians will hate Trumpcare just as much as they hate Obamacare. Why do you think you will like Trumpcare? Do you realize that Trump is promising coverage to all those people now getting Obamacare? Do you think he is some sort of genius who will come up with a magical libertarian version of Obamacare?

  29. Gravatar of E. Harding E. Harding
    4. December 2016 at 10:10

    “Is this some kind of joke? Putin is intervening against IS? Actually he is supporting Assad, who is far, far more murderous than IS. But Trumpistas don’t care about those things.”

    -You are too stupid to live.

    “I think he was more likely to get us into nuclear war than Hillary”

    -You are too stupid to live.

    “I don’t like his views on the Baltic states.”

    -You are too stupid to live.

    “Are we to assume that libertarians now support Trump’s call for massive tax cuts, combined with massive increases in government spending?”

    -Every single Republican candidate had that call (except, I think, Rand). Again, you are too stupid to live.

  30. Gravatar of E. Harding E. Harding
    4. December 2016 at 10:12

    Bob, debating Scott Sumner is a fool’s errand. Focus on more beneficial pursuits.

  31. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 10:34

    “Do I really have to remind people that the German market rose under Hitler?”

    And provide yet another example of you insinuating and indirectly suggesting Trump is like Hitler, then feign ignorance when your readers keep pointing out time and time again that that is precisely what you keep doing?

    Oh yes, do please “remind” us of your Trump/Hitler juxtapositioning strategy. For the greater good and everything.

  32. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 10:40

    Sumner wrote:

    “I don’t like his pathological lying, which tends to corrode and debase our political system over time.”

    Oh no that won’t do, because if a lot of people believe those claims to be true, then according to your Rortyian metric for what constitutes truth, thee claims ARE truth.

    How can you possibly claim Trump is lying about all of these particular issues if according to you no human can know the truth of any claim unless it has been first vetted and approved by “what most people are persuaded of”?

    Did you go out and conduct a study of what most people believe about any of the things Trump said? Of course you didn’t. For that would be a consistent thing for you to do. No, you relied on your own judgment. Ha.

  33. Gravatar of Bob Murphy Bob Murphy
    4. December 2016 at 10:48

    OK Scott, I may have been wrong. (I hope you were sitting down!) I am pretty sure this was the post where I thought you were saying Trump can’t even pick a good team to advise him–since you said he was a horrible manager–but I re-read it and you were talking about his fundraising. So, perhaps I was wrong to say you had told us Trump wouldn’t pick good advisors.

  34. Gravatar of Bob Murphy Bob Murphy
    4. December 2016 at 10:50

    BTW Scott, just to add nuance to my last comment: That was clearly the post I had had in mind. But then here, in these very comments, you wrote: 3. I said he would not pick good advisors.

    So *that’s* what made me now say to you, “So you were totally wrong, right?”

    Because to repeat, the point of your OP here is to say the market is hearing two of Trump’s advisors talk, and that’s why the market is up.

    But, at this point nobody cares so I am happy to drop it.

  35. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 11:29

    Eureka!  See how awesome rising NGDP can be? It hath been judged favorably by the almighty stock market standard:

    https://www.themoneyillusion.com/?p=22046

    That is still the standard, right?

  36. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 11:30

    A rising stock market is so good it should be a permanent feature of our lives:

    https://www.themoneyillusion.com/?p=1818

    That is still the standard, isn’t it?

  37. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 11:32

    Market rose after Trumpitler was elected?

    Oh noes.

    No wait, he’s got this:

    ” Do I really have to remind people that the German market rose under Hitler?”

    Checkmate Trumpistas.

  38. Gravatar of Britonomist Britonomist
    4. December 2016 at 11:43

    @Bob Murphy

    “the markets are (apparently) predicting a much better economy under Trump than under Clinton.”

    How can you say that without a counterfactual Clinton win? Perhaps the stock market are just cheering on the fact Republicans won congress & senate & presidency, massively reducing uncertainty, when they were expecting much more deadlock. There are so many other possible reasons that don’t involve actually good economic policy. Let’s not forget it’s mostly animal spirits anyway (I’m sure Scott disagrees).

    “Repeal ObamaCare”

    So that’s liberals out. Now all we have left is libertarians and conservatives.

    “Open up domestic energy development
    Get rid of EPA restrictions on coal-fired power plants”

    I think it’s foolish to think (sophisticated) libertarians don’t care about environmental externalities.

    “Massive tax cuts”

    Combined with massive spending increases that will balloon the deficit/debt to astronomical levels? Not sure libertarians will like that, and austrians would be terrified.

    “Don’t start WW3 with Russia”

    Trump’s temperament isn’t just a meme. He will be a disaster for international relations. He’s the one who says “we have nuclear weapons, why don’t we use them”, he’s the one who said he’d start a war over Iran over mild taunting from them. His personality screams dangerous lunatic, his defence pick is a major hawk…

    ” saying he was trolling the media to get free publicity.”

    In other words he’s a liar.

  39. Gravatar of Major.Freedom Major.Freedom
    4. December 2016 at 12:12

    Britonomist:

    “How can you say that without a counterfactual Clinton win?”

    Serious when I say I love it when reasonable, common sense statements (and rhetorical questions) like that one are at root a rejection of empiricism in economics.

    Indeed, how can anyone know anything about economics given only factuals, never counterfactuals, can be observed?

    This is why empiricism in economics is so political. It is shysterism masquerading as knowledge. Empiricism in economics is used more as a weapon than anything else. The “useful idiots” who think they are “contributing to human knowledge” are really only providing statist cabals and other criminals with intellectual weapons to justify their actions.

    The actual role Monetarism of all kinds and Keynesianism of all kinds play, is to provide the criminal counterfeiting oligarchy with advice on how to maintain their coercive, anti-market hegemony.

    BTW, the most obvious empiricist answer would be “Well the market likely expected Clinton to win”, and priced that in before Nov 8.

  40. Gravatar of ssumner ssumner
    4. December 2016 at 12:54

    Bob, I really think you are wasting time looking for contradictions. I do not think Trump will pick good advisors, and indeed his choices so far have not been good. Do you think Steve Bannon was a good choice? How about Pompeo? How about Flynn? How about Sessions? If stocks rise because something one of his economic advisors said, that doesn’t even come close to contradicting me. Indeed it’s completely unrelated to my claim. We don’t elect presidents to make the stock market go up.

  41. Gravatar of Major-Freedom Major-Freedom
    4. December 2016 at 13:19

    “If stocks rise because something one of his economic advisors said, that doesn’t even come close to contradicting me.”

    Of course it does, because Trump picked that “economic advisor.”

    It is not only related to your claim, but is a direct component of it. You cannot erase the contradiction by belittling and minimizing the picks whose statements and plans are by your own admission favorable to the stock market. The market is the combined outcome of ALL of the picks. If all those other picks are as bad as you say, then wouldn’t the market see that these bad picks outweigh the mere comments of one single economic advisor?

    That hole being dug…it is starting to echo.

  42. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    4. December 2016 at 15:26

    ‘Patrick, His promises on health care are so contradictory that no one knows what he will do. I predict that libertarians will hate Trumpcare just as much as they hate Obamacare. Why do you think you will like Trumpcare? Do you realize that Trump is promising coverage to all those people now getting Obamacare? Do you think he is some sort of genius who will come up with a magical libertarian version of Obamacare?’

    None of that is relevant to my comment, which was clearly directed at answering the question that I quoted–i.e., my SOP–which was (I re-quote);

    ‘What possible reason could a liberal or libertarian have to think Trump will implement good policies?’

    Whatever Trump does–and neither of us has a crystal ball–does not, at this stage of the game, negate his promise to repeal the profoundly illiberal Obamacare.

    I happen to be studying tax law just now, and even with my previous belief that Obamacare was a Rube Goldberg scheme that ensnares citizens in government’s web, I didn’t know the half of it until I started actually getting into it.

    I’m not making up the bit about taxpayers being obligated to report a pregnancy if they are getting Advanced Premium subsidies. It’s in IRS publications.

  43. Gravatar of Scott Freelander Scott Freelander
    4. December 2016 at 15:43

    Scott,

    I’d like to play devil’s advocate here. Using Friday’s closing data, the S&P 500 is only up about 2.4% since November 8.
    In a model some of us are working on, that translates into a bit less than a tenth of 1% higher NGDP growth, at best. I wouldn’t have tremendous confidence in many of the explanations for this rise since the election.

    Instead of net positive supply-side efficiency gains, expectations that increased deficit spending will lead to higher interest rates, even if they are stimulus-neutral, seems as good a guess as any.

    Notably absent from discussion I’ve seen is the possible effect of Trump’s foreign policy on NGDP. I haven’t seen a real integrated analysis of the net effect of all Trump policies, which is understandable, since Trump is such a liar and seems so little wed to most of his public pronouncements, that it’s impossible to make worthwhile predictions.

  44. Gravatar of Scott Freelander Scott Freelander
    4. December 2016 at 15:44

    I should say, by the way, that higher rates might be seen as a net positive, only because the zero-lower bound would then be somewhat less of a problem in the future, all else equal. Some of the downside risk to the economy goes away.

  45. Gravatar of dwb dwb
    4. December 2016 at 20:43

    I think you should read Tim Duy, he seems to have moved past anger, depression, and denial directly to acceptance. He has a pretty good grasp on the issue.

    It probably feels good to use words like “dumb as doorknobs,” attempt to ridicule people, and mock peoples reading comprehension**. But you should decide whether you want to actually persuade people or be an insult comic like Don Rickles.

    If you decide go go down the Don Rickles insult comic career, please don’t worry about putting me on ignore. Once you get a gig at the local stand up comedy club, I will be downloading all your shows. I probably won’t be paying, at first, because frankly your material needs a lot of work. “Dumb as doorknobs” is neither original nor entertaining. Trump is the very best at insulting and ridiculing people, may I suggest you take a sabbatical and learn from one of his speech writers? Hillary Clinton had some good writers as well, she managed to insult 60 million people with a single word, deplorables.

    But before I pay admission, please do strive to get better material. Your material should be original, creative, and fun. I paid $100 bucks for a show in Las Vegas and got insulted by some libertarian comic magicians, now that was a blast! Maybe you could intersperse your insults with magic and some girls in short skirts.

    Incidentally, remember, those deplorables you are ridiculing vote. And they just gave academic economists the middle finger. The middle finger is the usual answer to anyone insulting or ridiculing, unless the insult is really entertainment.

    ** When a lot of people misunderstand my writing, my natural instinct is to think It was not clear. English is a contextual language, and people have extremely diverse backgrounds. But, sure, mocking them is certainly a good approach if you enjoy the warm blanket talking to yourself in the safe space.

  46. Gravatar of Lorenzo from Oz Lorenzo from Oz
    5. December 2016 at 04:24

    Scott: I have just had the full Major Freedom experience. Fascinating. Complete inability to understand my point and bizarre projection. On the other hand, you clearly understood my point, so it is not hard to grasp.

    Just to be clear: my point was precisely that Austrian economics weren’t “nationalist” (or, more to the point, dirigiste) in any useful sense precisely because they were dealing with a society where patterns of preferences, norms and expectations were sufficiently diverse, that emphasising individual choice and pushing a policy regime which not only could deal with preference diversity, but, if anything, actually revelled it, was a sensible and rational response to the diversity embedded in that society.

  47. Gravatar of ssumner ssumner
    5. December 2016 at 08:28

    Patrick, I believe ObamaCare is a bad program, but Trump has not proposed anything better.

    Scott, I agree, and was giving them the benefit of the doubt. That is, if Trump has pushed up stock prices, why might that be?

    dwb, How does Tim Duy respond to comments that lie about what he said in a post?

    You said:

    “And, you should know better than to predict Trump is going to cause recession! ”

    Why did you lie about my views? I’ve repeatedly said that real bond yields have risen since the recession due to expectations of faster economic growth.

    And your previous comment also mischaracterized my views.

    I also find it odd that you complain about me being rude to you, after posting a comment that was dripping with sarcasm and contempt for me. How do you expect me to respond?

    As far as being depressed about the election, you obviously don’t know much about me. At a personal level a Hillary presidency would have been far worse for me, as I would have been blamed for everything that went wrong. As it is, every morning for the next 4 years will be like Christmas morning for me, as I get to say “I told you so” over and over again. Trump is heaven for us neoliberal bloggers.

    Direct those comments at people like Krugman, they don’t apply to me.

    Lorenzo, Years ago I realized that Major was either stupid or dishonest, and I stopped reading his comments.

  48. Gravatar of ssumner ssumner
    5. December 2016 at 08:29

    dwb, As an analogy, the election of Bill Clinton in 1992 produce the 8 best years of Rush Limbaugh’s life.

  49. Gravatar of Elizabeth Harris Elizabeth Harris
    5. December 2016 at 18:38

    Lawson Boom coming to America?

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