According to the NYT, Wall Street investors are putting lots of money into the TACO trade—TACO being an acronym for “Trump always chickens out.” When asked about this, Trump predictably went ballistic. What does this mean for the future?
The negotiations with the EU were never likely to succeed. Now, with Trump’s manhood on the line, the prospects for a deal are even worse.
In an interview in today’s NYT, Elissa Slotkin argues that the Democrats failed to understand how angry the public was about the economy and didn’t have a persuasive argument for change. As I’ve noted many times, however, Joe Biden did have an ambitious plan to make fundamental changes to the economy for the benefit of workers in 2020, but it failed in the face of inflation, intolerably slow implementation, bad salesmanship, and a lack of votes in the Senate. The Democrats could not run as change agents in 2024 because their plan for change had already run aground. What does this mean for next time?
It will be even harder to accomplish major reforms after 2028 than it was after 2020 because the debt and the cost of money have gone up significantly in the interim. That means a progressive plan to expand the welfare state will have to be funded by major tax increases, and not just on the very wealthy, to be plausible. The alternative will be to push the lower cost abundance agenda and downplay wealth redistribution; that was the model used successfully by the Labour Party last year. Getting rid of the Trump tariffs will, of course, be the centerpiece of the plan.
Will the electorate be willing to accept tax increases in exchange for additional economic security? We’ll find out in 2028; it won’t be necessary to talk about the tradeoff in 2026.
Trump, to his great credit, is not a warmonger, and he has not shown any interest in becoming Bibi’s lawn guy in Iran. So where does Bibi go from here?
He is greatly admired by a large segment of the GOP. He can start banging the drums for war in conservative circles. Would Trump be able to resist that?
Two observations are pertinent here. First, as much as the right embraces Israeli aggression, it probably fears Trump’s wrath more, at least at this stage of his presidency. Second, Trump has succeeded in defining any public criticism of Israel by the blue team as antisemitism. It would be ironic indeed if Bibi could quietly turn that argument against him.
The Brazilian government has kept relatively quiet in the face of Trump’s efforts to dominate the hemisphere. The truth, however, is that Trump and the current Brazilian regime are natural enemies. Brazil has a large population, extensive business ties with China, and a left-leaning leader who displaced Trump’s ideological twin. Can the uneasy peace last?
I don’t think so. Expect Brazil to become vocally anti-Trump in the near future. How far will Trump go to put an end to the unwelcome dissent in his backyard? TBD.
Trump clearly views the Western Hemisphere as a sphere of exclusive American influence. Some commentators argue that he is just following the Monroe Doctrine. Is that true?
The Monroe Doctrine was an expression of American desire to prevent reactionary post-Napoleonic European regimes–primarily Spain–from throttling revolutions in South America. The US did not have the strength or the will to do this on its own, let alone dominate South America by itself. The hard work there was actually done by the British fleet. In fact, in some ways the Monroe Doctrine was a sympathetic reaction to British attempts to maintain the South American markets won during the recent war.
Conditions are much different today. The US is the greatest military power in the world. Trump doesn’t simply seek to keep foreigners from dominating the rest of the hemisphere, as Monroe did; he wants to dominate it himself. That may be a logical application of the Monroe Doctrine to changed circumstances, but it isn’t the same thing at all.
Trump’s efforts at mediation and arbitration have failed miserably, as any reasonable person would have predicted. Where does he go now?
It is painfully obvious that he has no intention of providing any significant additional military assistance to Ukraine. That leaves him with three options: to cut off transfers of American weapons, but to continue with intelligence sharing and to acquiesce to European transfers to Ukraine; to eliminate the intelligence sharing, but to at least do nothing to stop the Europeans from helping; or to use his position in NATO to prevent the Europeans from providing assistance. Under the first scenario, Ukraine will probably lose more ground, but should keep its independence; under the second, its sovereignty is in serious jeopardy; under the third, America is effectively a Putin ally, NATO will splinter, and Ukraine will become a Russian vassal state.
To put it in simple Trumpian terms, how many cards will Zelensky be permitted to play from this point forward? TBD.
We’re on the other side with Hamilton and Jefferson again. Let’s listen in!
J: What’s wrong, Alex? You seem really down again.
H: It’s those idiotic Trump tariffs. He’s doing everything he can to ruin our country.
J: I don’t get it. You supported tariffs when you were in power. Why the change?
H: Tariffs can be justified in the name of national security or when you’re trying to protect vital infant industries from unfair foreign competition. In addition, tariffs were one of the few practical ways to fund the government in the 18th century. Trump’s tariffs don’t have any of those justifications.
J: True. It’s hard to know what he’s trying to accomplish. And he keeps changing them. It looks like he just wants to be at the center of the universe.
H: I read somewhere that he just likes tariffs, and that everyone around him is trying to reverse engineer them to make sense. That’s about as plausible an explanation as any.
J: I certainly can’t figure it out. It looks like he’s trying to rebuild the economy of the 1950s. Why stop there? Why not go back to our day, like the Supreme Court?
H: Anyway, as far as I’m concerned, the tariffs are your fault.
J: Me? I was a free trader from day one. I believed in low taxes and minimal government. Tariffs aren’t consistent with that.
H: But you were a populist, just like Trump. And the tariffs are just a counterproductive exercise in playing to the gallery.
J: By the standards of the day, I was a left-wing populist, not a right-winger like Trump. And Trump isn’t really a populist. He just plays one on TV while he cuts taxes and regulations for big shots. You would appreciate that.
H: Not really. We can discuss that some other time. But you’ve convinced me for now. This is just on Trump and the fools that voted for him. God only knows where it ends, but it won’t be good.
J: Let’s leave it at that.
I’m reading a lot of rumblings that the Senate plans significant changes to the House bill. Is that likely to happen?
The ideological makeup of the Senate, at least as it pertains to taxing and spending issues, mirrors that of the House. Johnson and Paul are the Senate equivalents of, say, Massie and Chip Roy; they are unhappy about the increase in the deficit, and they may well vote no. Hawley purports to be an economic populist, but he is extremely ambitious and stands to lose if he bucks the party line; he will, in the end, cave and vote yes. McConnell, Collins, and Murkowski have issues with Trump on lots of other issues, but not on taxing and spending priorities. They voted for the 2017 bill, and they will do it again. All of the others just want to keep Trump and the donor class happy, so they will vote for whatever is put in front of them.
In short, something very similar to the House bill will scrape through with a one or two vote majority after lots of grunting and groaning. Then J.D. Vance will tell us that legislation which primarily helps the rich and cuts food and medical benefits for struggling white workers is consistent with MAGA ideology because it temporarily eliminates taxes on overtime and tips.
Trade negotiations with the EU aren’t going well. How could they? Unlike the UK, the EU is a huge market with a large trade surplus with the US; unlike China, it is not an authoritarian and mercantilist entity that can easily impose its will on its citizens.
As you might expect, Trump is threatening much higher tariffs as a result of the deadlock. The EU will, of course, retaliate, and things will go downhill from there until the markets and the polls threaten Trump the way they did with China.
My real fear here is that Trump will take out his frustrations on Ukraine. The EU is determined to keep Ukraine safe and sovereign; can Trump resist the temptation to use Ukrainian independence for leverage in the trade talks?
Probably not, if history is any guide, which it usually is.
Trump wants to change the name of Veterans Day to “Victory in World War I Day” in order to emphasize his perception that Americans are winners. With that in mind, and in light of its origins, shouldn’t he also try to change the name of Memorial Day to “Victory in the Civil War Day?”
What, you don’t think the man who thinks American military bases should be named after loser Confederate generals would go for that?
Biden and Trump, in their wildly different ways, were both trying to overcome the worst features of the dollar store economy. Biden was defeated by inflation and the lack of votes in the Senate. Who will be responsible for the failure of the Trump plan?
The bond market, unhappy consumers, uneasy investors, and billions of nasty foreigners who refuse to submit to the Trump regime.
Two things are clear about nationwide injunctions: we don’t have, but need, some reasonable standards regulating them; and whatever they ultimately are, the citizenship issue should qualify for one. This is not a partisan issue. My guess is that the Court will create a test that involves fundamental rights, multiple decisions in favor of plaintiffs, or both.
The 4-4 vote on Oklahoma religious charter schools in the most obnoxious case yet involving state support of Christianity is only a brief reprieve; this issue is bound to come up again in some other red state. Finally, the preliminary decision to empower Trump to fire the members of independent agencies is deeply troubling, and the unprincipled carve-out for the Fed is based purely on politics, not sound legal reasoning. It sounds a lot like the completely unconvincing distinction between abortion and gay marriage in the Dobbs case.
About a week after telling Arab heads of state that America would no longer berate them about human rights, Trump subjected Cyril Ramaphosa to the Zelensky treatment at the White House. His clear intent was to humiliate the leader of a regional power over a bogus issue–the supposed genocide of white farmers in South Africa. What was the point?
To exercise his id and please Musk and the base, I suppose. But consider the larger impact of those TV images. Trump believes in personal diplomacy; what world leader, other than Bibi or MBS, will want to visit the White House after watching that ugly display? And South Africa has never behaved as an American vassal state; how can alienating it improve America’s image in Africa and the rest of the Third World?
J.D. Vance, in an NYT interview with Ross Douthat, says that we will know if the Trump economic plan is successful if we make a significant dent in the current trade deficit. Is he right?
I’ll answer the question with a question. Does it really make sense to say that the trade deficit is a more meaningful measurement of our economic well-being than per capita GDP, the unemployment rate, or the rate of inflation?
If Vance is right, in fact, we should be deliberately trying to generate a large recession, because it would reduce the trade deficit. I somehow doubt the American public would be very enthusiastic about that.
“Forget about the Godly Society. Forget about the most extreme case for the tariffs. We can’t rebuild the society and the economy of the 1950s with tariffs. We won’t have a huge increase in the number of manufacturing jobs. We won’t completely eliminate all of our bilateral trade deficits. That simply isn’t realistic.
But we can move the needle. Tariffs, along with tax cuts and massive deregulation, will create a better climate for investment in this country. Increased investment means more jobs and higher wages. In addition, the deals with our trading partners will increase exports in some fields, such as agriculture. There will be down sides, of course; prices will go up in the short run for American consumers, and it will take some time for the investments to bear fruit. There may be a period of stagflation this year, possibly even extending into 2026. In the long run, however, we will be better off.”
The principal problem with this analysis is that there are several reasons why the investment boom supposedly caused by the tariffs won’t materialize. First of all, since there no public consensus in favor of tariffs, investors will know that the tariffs could disappear when Trump leaves office. Second, Trump’s natural capriciousness means the current uncertainty regarding the purpose and amount of the tariffs will continue throughout his presidency. Third, declining American consumer confidence resulting from the tariffs will make investment less attractive. Fourth, there is no large pool of American skilled workers available at this time to work in the hypothetical new manufacturing plants, and the deportations won’t help. Fifth, the tax cuts mostly maintain the status quo; as such, they won’t encourage much more consumption. They will, however, increase the deficit, which will probably result in higher interest rates. Sixth, the deregulation promised by Trump apparently will be accomplished by legally questionable methods, which means it may never become effective. Finally, there is no guarantee that most of the trade negotiations over the reciprocal tariffs will succeed; if they don’t, the retaliation that is likely to follow could make the tariffs a net negative for exports.
In short, even the more conventional and moderate case for the tariffs isn’t likely to produce positive results.