Trumponomics II, The Sequel

The failed attempt to assassinate Trump has increased the chances of his re-election. It has also increased the likelihood that Biden will remain the Democratic candidate, removing a potential risk-off event for markets if the 25th Amendment had to have been invoked. Republicans will control the Senate for sure, and likely the House by a small margin, even if Trump loses. The most important economic consequence of a Trump presidency would be the installation of a strong cheerleader for the economy, energizing “animal spirits” even among Democrats. Trump will not fire Powell, having admitted in 2018 he lacks the authority to do so. The extension of the expiring 2017 tax cuts would not be a budget-buster, as they are now more than paying for themselves. Trump’s debt record is no more profligate than Biden’s, with half the debt created in his first term arising in the last ten months during the Covid emergency, on a bi-partisan basis. Tariffs are not necessarily inflationary, and may not be anti-growth, depending on the incidence of their payment. Broad tariffs would require legislation and would unlikely get past even a GOP Congress. Trump’s de-regulatory stance would benefit not just energy, but banking as well. The worst risk is sealing the border. Mass deportation would be a disaster on the scale of the Great Recession but is not logistically possible. Slowing the flow of immigrants would reduce job creation and slow both production and consumption.