An Economic Genius: Part 2
August 1, 2019
A few weeks ago, I shared some thoughts about our current President and his economic credentials.
Donald John Trump was one of 366 student members of the class of 1968 who was awarded a Bachelor of Science degree in Economics from the Wharton School of Finance and Commerce at the University of Pennsylvania.
Other than his bachelor’s degree and some experience working in the family real estate business, there is no evidence that Mr. Trump has pursued additional education, credentials or capabilities in the field of economics.
Trump’s paucity of bona fides in the world of economic theory and practice has not deterred him from taking an active role in testing new economic theories and concepts.
Below, I introduce a new chapter in my observations on Donald Trump’s economic strategy:
…………………….…………………………………………………………………………………………………………………………………..
July 31, 2019 (Wednesday): Federal Reserve Chairman Powell reluctantly announced a 25bp cut in the federal funds rate, the first rate cut in over a decade (December 2008). In his announcement, Chairman Powell cited, “implications of global developments for the economic outlook as well as muted inflation pressures”. The Fed also referenced an apparent global economic slowdown; uncertainty around U.S.-China trade negotiations; and ‘stubbornly low inflation’.
August 1, 2019 (Thursday): Donald Trump announced (in a series of tweets) that the U.S. would impose a new 10 percent tariff on certain goods from China beginning on September 1, 2019, following the news that trade talks with the China have failed to make sufficient progress.
These new tariffs will apply to the $300 Billion of Chinese goods which had not before faced a tariff. Another $250 Billion of Chinese goods will continue to be tariffed at a 25 percent rate.
This abrupt and unusual move roiled the equity markets, creating a major sell-off.
Since late 2018, the U.S. economy has been showing signs of slowing — bond markets are flaccid; GDP has slowed; new home sales are generally flat; and business investment is anemic, at best.
Virtually every main-stream economist agrees that Trump’s trade war is contributing to the domestic economic malaise, although it’s too early to determine by how much, and if the damage is permanent.
The Fed rate cut on Wednesday was accompanied by a caveat that one purpose was to help create a barrier to prevent Trump’s trade wars from toppling our domestic economy.
Thursday’s surprise announcement by Trump reveals a new, arbitrary, capricious and unilateral decision by the White House which will result in higher taxes to Americans on imports; and further expand uncertainty for businesses which need significant time to manage their supply chains.
The agricultural sector in the U.S. – farms and ancillary industries, suppliers, manufacturers, etc – are already fighting the unexpected impacts of climate and weather on production. Then, they were handed a potential death sentence by a White House which is guided not by strategy and planning, but by impetuous and arbitrary policy changes driven by Trump’s narcissistic compulsions.
If Trump’s Trade War battle plans were conceived within a coordinated environment (i.e. in concert with the Fed and the Congress) perhaps we would be able to see a pathway toward successful outcomes.
Trump is consistent in his bravado that he – and he alone – has the vision, wisdom and solutions to create equilibrium in the trade accounts between the U.S. and China.
According to a BBC analysis from May 2019, “Trump’s decision to take on China could lead to adverse effects for consumers in the US and in China, but also worldwide. An economic showdown between the world’s biggest economies doesn’t look good for anyone.”
Article I of the US Constitution vests the power to set tariffs in Congress, thus Congress has the power to stop this President from continuing his arbitrary and impetuous trade war. The question remains: Will elected officials in Congress wake up, do their job and use that power, or will they continue to abdicate legislative responsibilities to this President?
The Essence of True Leadership
July 11, 2019
After a remarkable 19 year career in leadership at the University of South Florida, President Judy Genshaft retired on July 1 in a planned and orderly transition, welcoming a new president, Dr. Steven Currall.
President Currall has spent his first few days talking with students, faculty, alumni and other stakeholders to ensure an open and honest transition.
In a recent radio interview, I was inspired to hear Currall tell us that his mission is to build on the accomplishments of the Genshaft administration.
Currall said, “My job is to help the USF community make the right decisions for the university in the long run. Sometimes those are group decisions: it might be my top leadership team, it might be decisions that the Board of Trustees has to make, sometimes the decisions that I have to make personally. But I don’t think it’s wise for a leader to try to do something simply symbolic as a way to establish authority.”
“I think the more mature approach is really just always to be thinking about what’s in the best long term interest of the university. I try to make decisions that will be received well and be seen as thoughtful and aligned with the strategic vision of the university.”
True Leadership: (1) A strategic vision toward the future. (2) Decisions aligned with the best long-term interests of the institution. (3) Building on an existing foundation of progress and excellence.
Wouldn’t this theory and practice help make our country a stronger and better place to live, work and relax?
walrus51 