SCANDALS, investigations and mass layoffs – the Republican administration of Donald Trump is anything but boring. However, behind every explosive headline, many of the changes that define U.S. economic policy slip under the table.
The focus of coverage shifts from the repeal of the few mechanisms of the state to control financial speculation, which caused the crisis of 2008, and deregulation for the benefit of major companies, to the most controversial comments of the current President, his attacks on the media or the progress of the investigation into the irregularities of the 2016 Republican election campaign.
However, in the midst of the chaos that characterizes Trump’s White House, there are powerful groups with a well-defined agenda in favor of the corporate sector.
The economy was the strong point of the New York tycoon and supposed “genius” of real estate in the race for the Presidency. His slogan, “Make America Great Again,” was aimed at the white, conservative and low-skilled electorate that is the majority in several regions of the country.
His populist rhetoric rang true in the so-called “Rust Belt,” the former industrial states that have seen the mass migration of their factories to other countries with cheaper labor and fewer regulations over the last decades.
If the so-called “losers of globalization” brought Trump to the Presidency, the economic team he installed in the White House was made up of its “big winners.”
Up until the beginning of this month, the mastermind behind the current administration’s economic policy was Gary Cohn, who was CEO of Goldman Sachs, one of the Wall Street giants.
Cohn designed the tax reform passed last year that cuts taxes for the rich, makes layoffs easier, and places corporate tax rates at the level of nations far less developed than the United States.
The long-term impact of the reform, according to economists, will be an increase of 1.5 trillion dollars in the U.S. budget deficit in the next decade. Meanwhile, 99% of citizens will not receive any benefit before the end of Trump’s term.
Following the departure of Cohn from the White House – many note with his mission accomplished and before being implicated in any scandal – Trump’s new economic guru was named as Larry Kudlow, also a well-known character on Wall Street and with experience in the Ronald Reagan administration.
The president took advantage of the change of adviser to boast of the good news for the U.S. economy, which grew 2.3% in 2017 and has a historically low unemployment rate, at close to 4%.
Meanwhile, it is no wonder Trump prefers to use stock market indexes as a measure of his success than his approval ratings, which position him as one of the least popular Presidents in the history of the United States.
However, many analysts, including Nobel laureate economist Paul Krugman, warn that he may be playing with fire.
Firstly, the mix of recent tax cuts, deregulation, and low unemployment rates could trigger wage growth and consumption at uncontrollable levels, which implies inflationary pressure and is the ideal recipe for recession.
Capitalist crises have four fundamental phases: crisis, recession, recovery, and boom. Some already note symptoms of overheating in the U.S. economy and the possibility that the cycle will repeat itself with a crisis similar to that of 2008.
The scenario could be even worse if President Trump finally applies protectionist measures such as raising tariffs on imports of raw materials or changing tariffs for specific countries.
While since the announcement of tariffs on imported aluminum and steel, Trump has softened the terms and established exemptions for some allies, the mere ghost of a new trade war is enough to scare to death stock exchanges in New York and throughout the world.
If any of these forecasts were fulfilled, Trump’s love affair with Wall Street would end in tragedy, and no scandal would be sufficient to uproot that news from the headlines.