The American people clearly long for the economy of 2019. Who can blame them? Unemployment was low, and real wages were rising, even for unskilled workers. Notwithstanding historically low interest rates and enormous deficits, inflation was completely under control. It was still the dollar store economy, to be sure, but life was pretty good.
Today, the underlying policy background is essentially the same as it was in 2019. The Trump tax cuts were not repealed, and the additional welfare state spending in the last pandemic relief bill has been wound up. The deficit is falling fast. Unemployment is at about the same level as it was in 2019. Unlike 2019, however, we are plagued by inflation, interest rates are rising, and a recession could loom. What does this mean, in policy terms?
That we would be in the same position today if Trump had been elected in 2020, and that the GOP is not entitled to any presumption that it knows how to deal with inflation. In fact, the GOP’s usual elixirs–tax cuts–would actually make things worse by fueling additional demand. If you want to make cutting inflation an overriding priority, you would do it by ditching tariffs, raising taxes, and requiring state and local governments to put their federal overpayments into rainy day funds, not tax cuts. All of these ideas would be violently opposed by Trump and his GOP buddies, and they will not happen, so all we can do in the real world is try to deal with the supply side problems and be patient.