Monday, January 16, 2017

Get Ready for the Trump Deficit

Here's a history lesson Conman Donnie -- and GOPers -- refuse to learn.

Via Mark Thoma -- here's the inside scoop from Kenneth Rogoff:
One only has to recall recent US economic history to confirm the insight of the Italian/Swedish model – and to see the absurdity of claims that Republicans always aim to balance the budget while Democrats always try to spend beyond the country’s means. Back in the 1980s, conservative hero Ronald Reagan was willing to tolerate enormous deficits to fund his ambitious tax-cutting plans, and he did so in an era when borrowing wasn’t cheap.
In the early 2000s, another Republican president, George W. Bush, essentially followed Reagan’s playbook, again slashing taxes and sending deficits soaring. In 2012, at the height of the standoff between the Republican-controlled Congress and Democratic President Barack Obama over deficits and the national debt, Republican presidential candidate Mitt Romney proffered an economic plan that featured eye-popping deficits to finance tax cuts and higher military spending.
 If a Trump presidency does entail massive borrowing – along with faster growth and higher inflation – a sharp rise in global interest rates could easily follow, putting massive pressure on weak points around the world (for example, Italian public borrowing) and on corporate borrowing in emerging markets. Many countries will benefit from US growth (if Trump does not simultaneously erect trade barriers). But anyone counting on interest rates staying low because conservative governments are averse to deficits needs a history lesson.
Since Trump has promised massive tax cuts, again aimed at the rich, he will drive massive borrowing leading to rising interest rates -- he has already called for them! -- there's no reason to believe we won't see a return to Republican fake fiscal responsibility. Why? Because it's a myth, and believing in it is irresistible to the servants of the donor class. Again, we're screwed.

My reaction? Get out of the stock market but quick.

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