A former U.S. government official believes President Donald Trump is severely hurting the American economy in various ways.
“We have a delusional, unhinged madman in the Oval Office, and anything is possible,” David Stockman, the former director of the Office of Management and Budget (OMB) under President Ronald Reagan, told Yahoo Finance’s The Ticker (video above). “He's conducting four wars on the American economy, and it's not going to make it great again.”
Stockman, who just published Peak Trump: The Undrainable Swamp And The Fantasy Of MAGA, argued that Trump is waging a trade war, a border war, a political war against the Fed, and a war on the nation’s solvency.
1. Trade war
In March 2018, Trump slapped a 10% tariff on $200 billion worth of Chinese goods. He accused the country of unfair trade practices that were hurting Americans and the U.S. economy.
China quickly responded with retaliatory tariffs on roughly $50 billion worth of U.S. goods. Tensions escalated for months with both sides refusing to budge on the issue, kicking up tariffs even further.
“The trade war is a war on consumers,” Stockman said. “If it goes from 10% — which is already costing $30 billion a year just on Chinese imports — to higher, that is only going to be that much worse.”
Negotiations are underway on a trade deal that would address issues including forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.
“It looks like perhaps this new version of the Titanic will avoid the iceberg,” American Apparel & Footwear Association’s president and CEO Rick Helfenbein told Yahoo Finance’s On The Move. “Clearly, that makes all of us very happy because we have serious concerns if these tariffs come in… it's already hitting us a bit. It's already baking some inflation into our system.”
2. Border war
Stockman then referred to Trump’s hardline stance against illegal immigrants as a “border war on immigrant labor.”
Because of shifting demographics, “the domestic labor force is shrinking,” Stockman explained. “We need immigrant labor. We shouldn't be having a, you know, silly battle over a wall in a border where there isn't a crisis.”
A promise he made while on the campaign trail, Trump now has appropriated enough funds to commence building a nearly 2,000-mile-long border wall across the U.S.-Mexico border.
The Trump administration has also inspired harsh immigration enforcement tactics carried out by the U.S. Immigrations and Customs Enforcement.
Stricter immigration policies will strengthen national security, they argued.
“We’re moving in tremendous numbers of people to get out the MS-13 gangs and others gangs that illegally come into our country,” said Trump. “And we’re getting them out by the thousands. But this is a perilous situation, and it threatens to become even more hazardous as our economy gets better and better.”
3. Attacking the Fed
Trump’s third war was a political one, said Stockman. And it was aimed at the Federal Reserve for its interest rate hikes.
“He's conducting a political war on the Fed that finally was getting enough courage up to normalize interest rates,” Stockman explained. “For crying out loud, 10 years, interest rates have been below the inflation rate, which means zero money market costs. It's been a boon like never before to speculators. It's done nothing for Main Street.”
After a decade of keeping rates low following the Great Recession, the Fed began to accelerate interest rates hikes, with a third one in September 2018. Chairman Jerome Powell indicated that the central bank was going to be more data-dependent in its decisions.
But Trump expressed frustration over the hike — fearing that it may stall the economy — and tweeted:
The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!
— Donald J. Trump (@realDonaldTrump) December 24, 2018
He even discussed firing Powell, according to a report by Bloomberg.
But last week’s Fed minutes indicate that the Fed would be more patient in evaluating financial conditions — which means that it is pausing interest rate hikes – given “risks and uncertainties in the outlook.”
4. War on the nation’s solvency
Stockman’s final gripe with Trump is over the national debt.
As the number soars past $22 trillion — which is 22 times higher than when Reagan and Stockman were in office — Trump remains mum on the issue.
“He's conducting a war on the nation's solvency with a fiscal policy that is more out to lunch than anything I've seen since 1970 when I started on Capitol Hill,” Stockman fumed.
The big challenge was that even though the economy has been expanding at a rapid pace, “we're in the last months… you don't raise the deficit to $1.2 trillion at the very tippy top of a business cycle and expect anything but bad results,” said Stockman.
Hence, Stockman said: "Everything he's doing is wrong. The trade war is wrong. The massive deficits are wrong. Beating up on the Fed when it's trying to go in the right direction is wrong.”
He added that the combined effect would be that “when the recession finally comes, and it will come in the next year or two years… the deficit is going to soar to $2 trillion a year as revenue collapses, like it always does.”
And as there are considerable tailwinds coming at the economy — both domestically and overseas — Stockman argued that “we're going to go into the 2020s with a massive retirement wave from the baby boom, a deficit that is beyond belief in size, and a national debt that's out of control.
It will be a nonstop crisis for the entire decade, unless we do something big and quick. And I think it's too late.”
Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.