“Fostering a culture of fear and ignorance is not the way to run a political party, or country, if it would ever come to that.” Popular Economics
I said in 2014 when writing in Huffington Post “Not all Republicans are bullies, and not all Democrats enlightened progressives, of course. But the bully mentality of House Speaker John Boehner’s “no compromise” tactics, or Senator Mitch McConnell’s filibustering of even the most innocuous Obama administration appointments have been the reason recovery from the Great Recession hasn’t been stronger.”
Fear and intimidation seem to be the main negotiating tools in the second Trump administration to achieve their goals, as well. President-elect Trump seems to believe that by threatening tariffs, he can force Denmark to give up Greenland and Panama the Panama Canal to strengthen our national security.
It didn’t work in his first term when shutting down government and mismanaging the COVID-19 pandemic created such a backlash that Nancy Pelosi and Democrats took back the House in 2018.
Why are tariffs an inflationary tax on imports? In the words of Nobel Laureate Paul Krugman: “What the tariffs would do is shrink our economy. They would cause us to sell less of the goods we currently export — that is, stuff we’re relatively good at producing — and more stuff we aren’t that good at producing. The effect would be to make the economy less efficient and poorer.”
And the level of inflation will determine what kind of growth we will see this year. Several Fed Governors have spoken about what inflation might do to the prospect of further rate cuts. Fed Governor Michelle Bowman and Kansas City Fed President Jeff Schmid both said the 100 basis points in rate cuts since September has brought the Fed’s benchmark rate down to “neutral,” where it neither dampens or boosts demand, according to MarketWatch’s Greg Robb.
Whereas Federal Reserve governor Christopher Waller said Wednesday that he supported more interest-rate cuts this year and didn’t think that proposed import tariffs from the incoming Trump administration will lead to upward pressure on inflation, also per MarketWatch.
We won’t know until higher tariffs are enacted, and which countries will be affected. But we know that the tactics of fear and intimidation haven’t worked in the past without damaging our economy as well as those countries targeted.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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