The Impact of Trump's Economic Proposals on Future Federal Reserve Rate Cuts
Many experts speculate that Trump's economic proposals may affect the Federal Reserve's future rate cuts. However, it is important to note that even with his MAGA policies, the economy will still experience growth.
Questionable Proposals and Tariffs
Trump's economic plan includes several items that are questionable, particularly his use of tariffs to protect US industries. While this may seem laudable, history shows that tariffs can lead to retaliation and harmful impacts, as seen in his previous term when tariffs negatively affected US soybean farmers. Consequently, Trump had to create subsidies to support farmers facing lost markets due to these tariffs.
Our trading partners respond to tariffs, making them a complicated solution for raising revenues. Therefore, any reduction in income taxes is likely to result in some increase in consumption and investment, but it falls short of fully offsetting the tax cuts, especially given the current low unemployment rates and the lack of unused production capacity.
The Federal Reserve's Role in Interest Rate Management
It is unlikely that Trump would be able to influence the Federal Reserve's interest rate reductions more quickly than the Fed itself intends. The Federal Reserve governors have 14-year terms, and thus, Trump cannot fire them. Additionally, the Federal Reserve has a significant impact on interest rates and inflation. While the Fed took aggressive action to raise rates, the slow decline in inflation can be attributed to the 12-month trailing average inflation metric. If measured on a month-to-month basis, inflation rates would have shown a well-controlled state even before the Federal Reserve started raising rates.
Tackling Inflation through Emigration Spending
Another proposed strategy by Trump involves spending billions to ship out over 10 million undocumented immigrants. Many of these individuals have been actively contributing to the workforce without any form of recognition from the government. Undocumented immigrants perform essential jobs such as milking cows, landscaping, tending to fruit and vegetables, slaughtering animals, working in restaurant kitchens, bakeries, and construction, among others. These jobs are often shunned by the vast majority of the workforce due to their unappealing nature.
These individuals have been working in the shadows and contributing to the affordability of food products and services. It is noteworthy that some of these immigrants have been in the US for several decades, striving to make a living and evade notice from law enforcement. It is time to address our immigration system and provide temporary employment options for those in critical food supply jobs.
Conclusion
Trump's economic proposals, while ambitious, may not significantly impact the Federal Reserve's rate cuts. The electorate and policymakers should carefully consider the long-term effects of such proposals and the limitations they impose. Instead of focusing on short-term solutions like tariffs and emigration spending, more sustainable and comprehensive reforms are needed to address the underlying issues of the economy and ensure long-term stability.