Chap. 24: Taking Back Trump's America Serialization

Stimulus Interruptus and the Trump MAGA Trillion

It will take years and smart policies to overcome a stagflation trap. Absent a well-crafted [stimulus and] relief package, expect small business bankruptcies to increase dramatically along with evictions and foreclosures. This situation is dire, and we are moving to fall off an economic cliff absent action.

Navarro Memorandum to Chief of Staff Mark Meadows, September 29, 2020¹⁸⁴

Of the all the Strategic Failures that would help take down the White House of Trump, the abject failure to successfully negotiate a Phase IV Stimulus and Relief Bill with the US Congress before Election Day was easily the most avoidable.

Passage of such a Phase IV bill prior to Election Day would not only have provided an urgently needed boost to the American economy and the flagging pandemic fortunes of many American workers, families, and small businesses. It would have illustrated President Trump’s ability to forge a strong bipartisan consensus.

Oh, and let’s not forget this not so little political nougat: Those Trump-signed government checks arriving in the mail from the U.S. Treasury for America’s beleaguered working classes would have surely been repaid in kindness at the ballot box.

This particular Strategic Failure must be laid squarely at the feet of the President’s lead negotiators – Chief of Staff Mark Meadows and Treasury Secretary Steve Mnuchin. Yet, as we shall see in the next chapter, National Economic Council Director Larry Kudlow must also be implicated. Kudlow’s repeated “don’t worry, be happy” comments about an alleged “strong V-shaped recovery” both to the media and in Senior Staff meetings would contribute mightily to the lack of any sense of urgency and thereby undermine the negotiations.

Shouting Fire in a Deaf White House

Over the course of my four years in the Trump administration, nothing would frustrate me more as an economist than the inability of the Meadows-Mnuchin negotiating team to move briskly forward on passage of a well-targeted Phase IV Stimulus and Relief package. My degree of frustration was firmly rooted in one of the few things I can say I do very well, which is to look accurately into America’s macroeconomic future.

I’m not sure exactly why I can do this. Certainly my Harvard training as a PhD economist has a good bit to do with it. I did, after all, learn at the knees of macroeconomic giants like Martin Feldstein and Dale Jorgenson.

Yet, as I would frequently tell my MBA students at the University of California-Irvine, the understanding of economics is a lot like playing music. Anyone can play some music through hard work. But absent a healthy dollop of innate talent, there’s no way you are ever going to wind up at Carnegie Hall – practice, practice, practice notwithstanding.

Now, here is the irony: While my father was a professional musician, I don’t have a lick of musical talent. Goats with cans around their necks sound better than me with a guitar in my hand. Thanks Pops. Yet, when it comes to gazing into the macroeconomic crystal ball, I have been far more right than wrong even in the boldest of my predictions.

For example, in my first book published in 1985 while at Harvard University, I predicted in The Dimming of America that we would face widespread electricity shortages by the year 2000. I made this prediction based on my data-driven observation that the electric utility industry had all but stopped building coal and nuclear powerplants because of burdensome regulations. Therefore, it was only a matter of time before demand outstripped supply and the lights went out; and I certainly hit that blackout nail on the head when such shortages ravaged what was by then my home state of California in the early 2000s.

This was no one-trick crystal ball forecast either. In a series of speeches to groups that included California realtors and Credit Union executives, I correctly predicted the 2006 collapse of the housing bubble. In my “Savvy Macrowave Investor” newsletter, I also warned in November 2007 of what would soon be a horrific stock market crash. That single prediction saved many of my subscribers literally millions of dollars.

There is also my 2006 Coming China Wars book prediction that Communist China would likely trigger a viral pandemic that would kill millions; and, more broadly, my numerous warnings about a rising and increasingly militaristic China – warnings that today look like they are straight out of a Pentagon or State Department report.

And let’s not forget that I was one of the first to state unequivocally that the Chinese Communist Party virus almost certainly came from the Wuhan Institute of Virology. Branded as a conspiracy theorist then, I yet again have been proven right.

I am telling you all this now because, as I watched the China-spawned pandemic begin to rip and roar through the American economy from my perch in the White House, I saw a new and very dark stagflationary economic future coming at us like a bullet train out of Shanghai. And this wasn’t my first apocalyptic vision or rodeo.

Shortly after Osama bin Laden’s terrorists bombed the Twin Towers on 9/11, I got a phone call from Peter Passell, who I had first met in the 1980s when he was a member of the Editorial Board of the New York Times. As the now editor of the Milken Institute Review, Passell wanted me to write an article about the likely long-term macroeconomic impacts of 9/11.

Deeply troubled as I was by the Radical Islam terrorist assault that had just rained down upon America, it was a project I immediately threw myself into. Indeed, I was grateful for the opportunity because I saw the publication of such an article as a way I might make a tangible contribution to my country.

The central conclusion of the article I would write – prescient in its own way – was that the long- term costs of 9/11 would dwarf those of the costs of that actual day. I based this conclusion on what would likely be profound structural economic adjustments triggered by 9/11.

It was not just that we would have to dramatically bolster the security of our transportation networks following the attack. There would also likely be a significant escalation of the war on terror, with all its attendant costs – although even I could not predict the stupidity of the Bush- Cheney-Rumsfeld-Wolfowitz quartet in tying us up in the trillion dollar tar babies of Iraq and Afghanistan.

My 9/11 article’s conclusion more than 20 years ago might just as well apply to an assessment of the structural economic impacts of the pandemic today. Wrote I:

… The full picture has yet to be painted. The ultimate economic cost of the tragedy will turn on how successfully policymakers cope with new challenges.… The stakes here are simply breathtaking.