The Worst Presidential Economic Policies

Let’s talk about the Presidential candidates’ worst economic ideas.

My preference when reading about presidential candidates is to focus less on the name-calling and memes, and more on their stated plans for improving the odds of positive economic outcomes for Americans during and after their administration.

When candidates propose something new, they should figure out if the policies would do more harm than good. Trump’s tariff plan, and Harris’ plan to fight food prices, each land somewhere between bad and catastrophic. 

Trump’s Tariffs

Republican nominee for President Donald Trump has proposed a 10 percent tariff on all important goods from outside of the country, and a 60 percent tariff on all goods from China. 

The stated purpose of these tariffs is to raise revenue that could replace other taxes such as income tax, plus protect domestic businesses and address a trade imbalance with China. 

There is near-universal agreement among economists that even before a trade war – and indeed this would prompt a response from all trading partners and trading rivals – the tariffs would effectively raise prices on US consumers. This would kick off an immediate round of inflation and impose a $300 billion tax on the US economy, according to the Tax Foundation.

To the extent that tariffs boost domestic production, they would fail to raise revenue. To the extent they raised revenue, the price hikes would be felt by consumers as inflation. Domestic manufacturers that depend on intermediate goods produced outside the country would also pay higher prices and feel that same inflation.

That’s all very predictable even before we get to the secondary effects, such as the offshoring that our domestic manufacturers would do to avoid the 10 percent tariff. And the tertiary effects, which would be a Trump administration poised to “cut deals” and grant tariff exceptions to companies and industries that it favors for whatever reason, legitimate, political, or nefarious. The opportunities for corruption would multiply along with the bureaucratic barriers to trade. 

To lend some nuance to my critique of Trump’s plan and the role of tariffs: Certain specific industries should get tariff protections or outright trade restrictions, plus domestic subsidies, if it is truly a matter of national security or the industry represents a key strategic chokepoint. 

A consensus among economists has shifted over the past decade to recognize that protecting a domestic computer chip industry for example, or protecting our capacity for domestic military manufacturing, is necessary for national defense. But these industries are rare and strategic.

Trump’s impulse toward national strength and bolstering domestic manufacturing has led him too far and is deeply misguided. The effects of blanket 10 percent tariffs on importations would be catastrophic for consumers and for practically every medium and large business in the country. The inflation effects would be massive and permanent.

Harris’ War on Food Prices

In mid-August Democratic presidential candidate Kamala Harris unveiled a series of economic plans, the worst of which is an intention to fight “corporate price gouging” on food and groceries. Her plan did not come with specifics, but it’s nonsensical on its face. 

To fight “price gouging” you have to be willing to impose “price controls.” And price controls will do more harm than good when it comes to food and groceries. 

I don’t doubt Harris’ team poll-tested this idea and found it a winning argument among their likely or persuadable voters. But if so, their electorate is wrong. 

Price controls involve monitoring for rule breaking. Price controls means regulators have to weigh in on the fairness of prices. Did the company raise its prices – on any number of (hundreds? thousands?) of grocery items for a legitimate or a non-legitimate reason? Who is to decide and how? You will need a massive and intrusive bureaucracy to police this. 

Companies will then anticipate government intrusion, probably err on keeping prices artificially low in the short run to avoid penalties, and then pretty soon you would see scarcity on the shelves because keeping that grocery item stocked is a money loser. Consumers – all of us – could be catastrophically affected. 

The goal of announcing a plan to fight “price gouging” is presumably to be seen as responsive to the very unpopular bout of inflation we experienced in 2022 and 2023. But there is literally no evidence that inflation is caused by mythical “greedflation” by corporations, and instead is caused by loose monetary policy, expansive fiscal policy, and corporations trying to adjust, survive, and thrive in a changing environment. 

To take one salient example of price rises for a grocery item:

Two years ago the price of a dozen eggs briefly became an economic meme and supposed evidence for inflation and/or greedflation. It was a classic gross misunderstanding, or purposeful manipulation, of the story of how supply and demand works. An avian flu wiped out about 100 million egg-laying hens since early 2022. Once the flu receded, prices dropped in late 2023. They have recently risen again as avian flu outbreaks have recurred. But at no point in this fluctuating supply story would price controls have helped the situation. Lower prices for eggs imposed on grocery stores would simply discourage chicken farmers from reinvesting in rebuilding their flocks. Eggs will be plentiful and affordable again when the market gets back to equilibrium.

If you take the price-gouging idea and start believing price controls on consumer goods are the answer to the problem, then you’ve lost the thread. Slippery slope arguments are usually mistakes, but I’m going to acknowledge where our brains go with the slippery slope logic. You’ve already thought of the words “Venezuela” and “Cuba” before you read them here. Those countries have a lot of price controls and it’s not helping the average person’s standard of living.

Harris further offered support for “smaller food businesses” as part of a plan to bring down prices. The instinct for smaller obviously codes as a populist appeal against big business, but defies common sense. Any consumer knows that if you want the lowest prices, you’re going to Costco, Wal-Mart, or in Texas specifically, an HEB Plus-type store. Basically as big box as it gets. The Harris campaign probably knows that “Support your big box store!” is not an appealing electoral pitch, but is usually how we get lower prices in reality.

Smaller food suppliers usually correlates with higher prices. Micro suppliers like farmers markets will happily sell you a delicious $6 tomato – and that has its own aesthetic and ethical appeal – but most of us cannot afford buying in bulk at that kind of smaller-food business more than once in a while. I can’t really see how the federal government supporting smaller food businesses is moving us in the direction of lower food prices.

Like Trump’s tariffs, Harris’ focus on lowering food prices has a gut appeal (pardon the pun) but an obvious misunderstanding of how markets work in reality.

To return to the idea of price controls and to moderate my critique for a specific consumer sector, price-regulating of medications (by contrast with groceries) can be extremely important because 

1. Pharmaceutical companies do hold legal monopolies (in the form of patents) so price-gouging in those markets can be a real thing, and

2. People buying life-saving drugs are truly vulnerable. Insulin is not a luxury good. Your expensive cancer treatment is not your consumer choice, it’s a life-saving necessity. These are complicated trade-offs but pharma is in a different category than highly competitive and substitutable markets like food and other groceries.

I hope the sophisticated advisors for our main Presidential candidates realize the folly of these populist proposals which defy common economic sense.

A version of this ran in the San Antonio Express News and Houston Chronicle

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DJT Is Just Perfect

Have you ever seen a more perfect match up between public company Trump Media & Technology Group Corp – aka DJT the stock – and the public persona of Donald J. Trump, the man and leader? It’s beautiful.

DJT post merger through April 2024

It’s huge, and some people still don’t get it. The people who don’t get it should be fired. I would just say that to them: You’re fired! 

Or rounded up and deported. Or worse. It could be a bloodbath. Financially, I mean. Or I don’t know, maybe some other way? 

The fake media will try to focus your attention on the “fundamentals” of DJT the stock: $4 million in revenue in 2023, on a $58 million net loss for the year, followed by a $8 billion value when the merger was completed. Later, the company bounced in value between a $4 and $5 billion market capitalization. 

Did the stock drop in April because it was trading at a valuation of 2,000 times its annual revenue? No, you should not try to apply the low energy rules of traditional finance to DJT. 

DJT is a perfect meme stock

To try to describe DJT from a fundamental perspective is to live in the old boring world.

Meme stock investing – which is what drives interest in DJT the stock – is about the grassroots. It’s about real, American people who don’t need experience with the stock market to stick it to the man.

Yeah sure, DJT the stock is volatile. Over the course of a week in mid-April it’s gone up or down by at least 15 percent a day, multiple times. That’s what keeps people talking about it, like its namesake. People can’t get enough of Trump, it’s exciting.

The Wall Street elites can talk about fundamentals until they are bleeding out of their eyeballs or their wherevers. 

unhappy_trump

As a meme stock, the point in buying DJT is not to turn a profit. The point is to band together in a show of solidarity against the enemies of Trump, who are also incidentally the enemies of grassroots real Americans. What matters is faith. If everyone works together and buys DJT, it can’t go down. It’s as simple as that.

When everybody is against him, that’s the point of maximum power for Trump. Because if the stock begins to rise, the elites have to cover their shorts, and they can lose, literally, an unlimited amount of money. That’s how it works with heavily-shorted stocks. When all the hedge funds and big boys are short, that is when grassroots real Americans show their faith in Greatness, and Trump. We saw that with meme stocks like AMC and Gamestop in 2021. We’ll see it again with DJT. Can you imagine if it comes out that Nancy Pelosi and George Soros have shorted DJT? I’m not saying they did. I’m just saying that would be a sweet day of reckoning.

Trump-Miss-Universe-Moscow
Trump in 2013 with Aras Aragalov, Putin-linked billionaire, for Miss Universe Moscow

Next they’ll say the Russians are buying DJT. The Russians, the Russians! Always the Russians. They probably are, who cares? That’s a big beautiful country too. Beautiful women. Christians, I’m told. Trump even hosted a Miss Universe pageant there in 2013 and met all the important leaders then.

DJT built on fraud?

Like its namesake, DJT the stock has been in a series of byzantine legal tangles. 

When DJT’s predecessor company was just a blank-check company called Digital World Acquisition Corp prior to the merger with Truth Social, the company and people around it allegedly broke some laws. 

In July 2023 the SEC settled accusations that insiders had fraudulently purchased DWAC shares with knowledge of a merger with Trump’s Truth Social business for $18 million. 

Three other investors were accused in June 2023 of making $22 million of illegal profit from insider trading on advance knowledge of the merger. That’s a lot more illegal profit than the company had revenue in 2023.

If supporters of the Law and Order party regularly dismiss accusations, arrests, settlements, and convictions for fraud, does that mean we should doubt the sincerity of either DJT the stock or Donald Trump the leader? No. It just means that we need to root out the deep state swamp things in the SEC and FBI who have a not-so-hidden agenda. Law enforcement officers will do anything to try to attack Trump, which is very unfair.

Under the next Trump presidency, those very nasty prosecutors at the SEC and FBI will hopefully be taken care of, so we can get back to backing the blue and having Law and Order again.

The stock swoons in mid-April as more shares will trade soon

Now, as is only correct, Trump the man currently owns nearly 60 percent of DJT the stock. This briefly gave him in March 2023 a 4.8 billion net-worth bump, on paper. 

As of this writing, the stock is sharply down to $5 billion from an approximately $8 billion valuation, after it merged with Truth Social. 

[****Ric – we can check this market cap mid-week before publishing? It’s been super-duper volatile.]

Company filings on April 15 described a large supply of additional DJT shares that may soon become available to trade. 

As of now, less than 29 million shares of DJT freely trade in the marketplace. 

By September 2024 there will be roughly 200 million tradable shares of DJT. Trump the man owns 79 million total, with rights to acquire another 36 million. Other insiders own 30 million with rights to acquire another 4 million shares. 

Under ordinary rules for a company going public, Trump and the other insiders cannot sell any of their stakes in the company until September, after a 6-month lockup. Should those rules apply to Trump? Is it fair to apply rules in an extremely unfair-to-Trump world? You tell me. Maybe the board of directors can look into this.

Does this have all the makings of a classic pump and dump stock fraud? What makes you think that?

A recent filing by DJT the company notes that “Because President Donald J Trump is a candidate for President, he may, subject to the Lock-Up Period, divest his interest in Truth Social.” I have long admired his willingness to divest his business interests to avoid any possible conflict of interest, so it just makes sense that he may need to abruptly sell his company shares in September 2024 due to his imminent election to the Presidency. 

Did the stock drop in April because of the expectation that Trump will sell his shares, cleverly taking advantage of the blind faith of his supporters and leaving them holding an empty bag? Why would you say that?

Trump’s ability to shift losses onto others while preserving his own financial viability is interpreted by his supporters as entrepreneurial cleverness rather than recognized as venal.

This assumption of cleverness rather than venality covers a lot of Trump history, such as the bankruptcy of Trump Taj Mahal in 1991, Trump Plaza in 1992, Trump Hotel and Casino Resorts in 2004, and Trump Entertainment Resorts in 2009. Plus, the failure of various brands – steaks, wine – and the fraud settlement for Trump University.

What part about Trump’s long history of bankruptcies, plus refusing to pay workers and creditors, makes you think he would abruptly offload his stock on his most loyal supporters now? I just can’t believe he would do that to them. Literally in September 2024. Or sooner, if the company’s directors allow him.

If the end result of sticking it to the man by disregarding any rules about earnings or profits or an authentic business is that regular real grassroots Americans are eagerly fleeced, and the self-marketing genius who inherited his real estate fortune from Daddy gets his net worth inflated by a few billion dollars in the process, well that’s just further evidence of his cleverness, no?

This DJT meme stock is just perfect.

A version of this post ran in the San Antonio Express News and Houston Chronicle

Please see related posts

Trump – A Threat To Democracy I

Trump – A Threat to Democracy II

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