The emphasis right now on lowering taxes makes no sense to me. Paying down debt is easier in increasing income. For example, for every 1% increase in government revenues is a decrease of nearly 100 BP in spending as a share of income when keeping aggregate spending level constant. Compounding a 5% increase in government revenue while holding spending constant translates into a nearly 24% reduction in spending/income over 5 years.
Tariffs
Bringing jobs back in the future by increasing costs today is not worth betting on. If jobs come back, it will take the long-term horizon (like 3-5 years) before domestic capacity can meet demand that foreign capacity is currently meeting. But in 3-5 years, tariffs are likely to be gone. That's a bad trade for anyone today because the potential supply constraints potentially create an inflationary environment, regardless of if companies want to pass tariffs directly to consumers or not.
Environmental, social, governance focus makes sense. Making use of natural resources, communities, and business operations more resilient should smooth out income, increasing LT NPV.
Risks to Democracy
Everything above leaves me to find that the risk to democracy is high. I don't think Americans are as aligned with this administration as voters seem to think, at least not in the short-term. We don't know what the long-term potential is as there's a lot of uncertainty. This potential coupled with demagoguery creates an incentive for this current administration to become exploitative.
Your concerns touch on several critical economic and political issues. Here's a breakdown based on the most helpful WSO content:
National Debt Level:
The emphasis on lowering taxes while the national debt continues to rise is indeed a contentious issue. As highlighted in WSO discussions, the U.S. is already facing significant debt challenges, with debt-to-GDP levels projected to rise dramatically if current policies persist. The $1.5 trillion tax cut and increased spending bills exacerbate the problem, potentially leading to unsustainable debt levels. Historically, reducing debt through increased revenue (e.g., higher taxes) while maintaining or reducing spending has proven effective, but this administration seems to prioritize short-term economic boosts over long-term fiscal health.
Tariffs:
Your skepticism about tariffs aligns with insights from WSO threads. Protectionist trade policies, such as tariffs, often lead to higher costs for consumers and businesses in the short term. While the goal might be to bring jobs back, the timeline for domestic capacity to meet demand is lengthy, and the inflationary pressures caused by supply constraints can harm the economy. Additionally, retaliatory tariffs from other nations can further disrupt global trade and growth.
ESG (Environmental, Social, Governance):
The focus on ESG is increasingly seen as a way to build resilience and long-term value. WSO content suggests that companies integrating ESG principles can smooth out income volatility and enhance long-term net present value (NPV). This aligns with your view that leveraging natural resources and fostering community resilience is a sound strategy for sustainable growth.
Risks to Democracy:
Concerns about the administration's alignment with voters and the potential for exploitative governance are valid. WSO discussions emphasize that political uncertainty and demagoguery can undermine market confidence and democratic institutions. The checks and balances in the U.S. system are designed to prevent overreach, but the current political climate, coupled with economic and social challenges, heightens the risk of instability.
Your analysis reflects a nuanced understanding of these issues, and the WSO community would likely agree with many of your points.
Sources: How will the results of the election affect Wall Street and the overall economy?, https://www.wallstreetoasis.com/forum/investing/the-trump-effect-on-markets-a-financial-not-a-political-analysis?customgpt=1, The Road to Ruin, PRESIDENT ELIZABETH WARREN, Koch Article
Tariffs are a popular topic and this administration is trying to fix a problem that does not exist. Higher tariffs are bad for the economy, markets and relationships across the world. Protectionism via tariffs has led to bad economic outcomes historically. Trump's approach is juvenile and focused on retribution.
ESG is a non issue at the moment in almost every way. Trump thinks: climate change is a hoax, diversity is bad and has no issues with conflicts of interest.
Democracy is at risk but the good news is that we only have to endure a few more years of this clown show. I just hope we can make it through the next few years without too much damage.
Assuming Trump and Musk don’t dismantle our institutions to the point of no return and we still have fair and free elections by then, the GOP will get completely eviscerated in the midterms. So we have that going for us.
Seeing our commander in chief who already tried to overturn a fair election result and clearly admires Putin and Xi’s ability to cling to power does not inspire confidence, though.
The only guard rails we have at the moment are the economy and stock market. Let's hope it is enough to inspire people to turn on the current administration.
Mr Trump is an insecure manchild and a narcissist. Once you understand that everything he does is meant to fill the yawning chasm where his self-esteem and self-confidence should be, everything he does makes sense. Tariffs aren't meant to help anyone, least of all Americans - they're a way for him to puff out his chest and make sure everyone comes begging him for relief, because that's what bullies do. His fawning, obsequious desire to fellate whatever dictator or authoritarian strongman comes across his path is part of the same pattern: those are the people he aspires to be, the kind of person he respects, and thus the kind of person he treats with deference.
Even within domestic policy everything is entirely focused around stroking his ego. Civil servants who don't like his policies, or officials who didn't put loyalty to Mr Trump over loyalty to the country, the Constitution, or their constituents get sacked or forced out of office. Even his choices for Administration officials are meant to flatter Mr Trump rather than form an effective government, which is a classic hallmark of a dictatorship in which the person in power cannot permit competent underlings who might threaten their position. Mr Trump has assembled a Cabinet mostly comprised of conspiracy theorist morons and ineffectual bootlickers, and the few people with anything resembling a basic competency (like Mr Rubio) are kept on such a tight leash that it's unclear whether or not they can actually be effective in their jobs.
You are trying to understand Trump 2.0 in the light of most other Administrations throughout history - trying to see how any of this benefits America or Americans, or fits into some pattern of policy or belief. And that's the mistake. Mr Trump wants power, but he doesn't have anything he wants to do with it in particular except purge his enemies, enrich himself (and protect himself from the legal repercussions of his complete lack of respect for the law), and maybe finally get Daddy's approval, even if only by proxy. In light of that, everything makes perfect sense.
It’s easy to understand this administration once you accept that Trump is a moron.
That's the worst part. These retards actually believe the retarded shit they say.
It's like the Soviet Union: even behind closed doors in meetings of the highest leaders they were still espousing Marxist Leninist nonsense. The signal chat leaks show that this admin is fully bought into their own bs.
Agree -- that was arguably even more damaging than the opsec leak. At least before Atlanticist Europeans could say it was just red meat for domestic politics, but now we know Vance actually believes this crap in private.
Freedom of navigation is woke
"(like 3-5 years) before domestic capacity can meet demand that foreign capacity is currently meeting"
You can't even plan and fully build out factories within 5 years. This is delusional. It took China 10+ years to do so and they have way more control over their citizens/financing and stronger business thesis (goods from China will definitely be cheaper whereas who knows if these Trump tariffs even last more than 1-4 years).
That's all to say factories ain't coming back to USA.
Paying off the debt is easier than increasing income. You assume that creating economic growth is easier, this is not true when government spending is crowding out positive economic development. Over the previous 4 years I think increases in government spending drove something like 85% of all GDP "growth". Now the refinance bill is coming due and the average cost of capital is going to increase by 40% given the amount of the debt that needs to be refinanced. That is on TOP of the increases that have already happened. We are rapidly careening into a situation where the annual increases in interest payments alone on the existing debt will entirely surpass GDP growth. After that it is impossible to escape from the vaccum that is created by the debt. Toss in a recession that is poorly mnanaged, like all recessions are, and the sunset window is pushed up by 5 years.
Don’t want to let facts get in the way of your argument my man but even being generous and going back to 2019 before COVID stimulus ballooned government spending, growth in G was less than 1/3rd of GDP growth from 2019-24.
Government spending increased by $2.6trn from 2019-24
GDP increased by $8.2trn from 2019-24
Now, forgive me because I’m not great at math but I don’t think 2600/8200 = 85%.
I’m also not arguing that the deficit is sustainable but I also would not mentally contort myself into thinking this current tariff policy is a realistic or well thought-out way to solve that (especially considering they seem to have just plugged it into an LLM to get the policy), nor is cutting taxes which is notably also still in the agenda and runs counter to the goal of shrinking the deficit.
I assume maintaining or returning to a progressive tax structure with a higher statutory rate is more logically consistent with debt reduction. I don't believe that tax cuts inherently lead to economic growth.
I agree, just don’t think GOP is willing to swallow that pill (even tho it ironically would probably receive less backlash than nuking the economy with Tariffs inevitably will).
Though I did see a couple rumors that they are considering hiking the top federal rate on those with >$1m in income to 40%. That’s not enough but it’s a start.
where did you get the number that 85% of gdp growth was government spending? fox news?
You can draw a straight line between increases in goverment spending and increases in GDP.
PEarbitrage is actually a retard. Every time he comments I know something retarded is going to come out. His arguments always either make no sense, are communicated incredibly poorly, or are just wrong. But what do you expect from a retard?
You know you can type @ and it will link someone like this, @anon1019.
Now with that said, you think the things that I say are retarded because they do not agree with the economics courses that you have taken. Well the economics gospel does not agree with the reality of what tens of millions of people in the USA experience on a daily basis. So I guess there are tens of millions of retards in the USA as well. At least I am in good company.
Why are there 8 parralel threads about the same fucking topic
It's the biggest event in the world?
Why are people talking about traffic - I mean tarrif so much?
It looks like the Fed is not going to bail us out. Powell basically said rate cuts are on hold due to inflationary tariffs. DJT is not going to like what he said.
Well, yeah, a rate cut would just add to inflation
Trump is going to tweet about him
Another aspect to this awful economic policy is its impact on companies that do not have the resources to move production to the US.
DEL
DEL
Possimus cupiditate eos sed est esse qui. Incidunt neque quia quas libero iure. Dicta nam beatae sed ea asperiores. Id rerum sed esse recusandae voluptatem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ad similique officiis quo alias. Libero quae enim est.
Sit qui ut nam accusamus omnis aut odit. Qui voluptas excepturi at qui inventore sunt quia voluptas. Aut adipisci sunt dolores dolore at. Nihil minima eveniet hic in facere. Est sint nemo quas quis fugiat voluptatibus.
Velit neque quam molestiae facere consequuntur autem. Minus et iusto id iste similique autem. Eum quos asperiores aperiam. Aut impedit omnis sed est in velit consequatur. Quasi sit molestiae dolores quia deleniti.
Corrupti voluptate rerum unde necessitatibus. Deserunt sit modi itaque molestiae voluptatem dolorem. Explicabo quisquam non non ea. Id molestias unde nulla eos qui.