February 21, 2020

Trump’s Economic Message: Everything Is Great, but We Need Huge Stimulus Now!

But there is a striking juxtaposition between that strategy and the administration’s words and actions since then.

On Monday morning, President Trump tweeted that the Federal Reserve should cut interest rates by a full percentage point and restart its “quantitative easing” program to stimulate the economy by buying bonds. Those are moves that the Fed, which operates independently from the White House, would undertake only if its leaders saw a major downturn on the horizon.

Later Monday, The Washington Post reported that the administration was considering a temporary cut in payroll taxes in the event of a worsening economy. After a denial by White House staff, the president on Tuesday affirmed it was being studied.

“We’re looking at various tax rate deductions, but I’m looking at that all the time,” Mr. Trump told reporters during a White House event. “Payroll tax is something that we think about, and a lot of people would like to see that.”

That was an approach used in the Obama administration to increase people’s take-home incomes as a form of fiscal stimulus. But to make it happen, the Trump administration would need to persuade both the Democratic-led House of Representatives and Republican-led Senate to go along.

There is precedent. The Bush administration succeeded in securing a bipartisan fiscal stimulus in early 2008. But there were important differences. The president was not up for re-election that year. Also, this administration has shown little capacity to strike deals with Democrats, even on areas where there could be natural alignment.

Exhibit A is an ill-fated effort to develop a bipartisan infrastructure legislation. The notion of “infrastructure week” has become a running joke, and the last effort to reach some kind of agreement between congressional Democrats and the White House blew up in spectacular fashion in May. (Had a major infrastructure bill been passed in 2018 or early 2019, its economic dividends might have started to emerge ahead of the 2020 election.)

Article source: https://www.nytimes.com/2019/08/21/upshot/trumps-economic-message-conflicted.html?emc=rss&partner=rss

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