Be careful what you wish for: Trump's 'conservative' spending spree fuels inflation?
Examining the past reveals a departure from true conservative principles in economic policy.
OPED by Jon Forrest Little
When the COVID-19 pandemic struck the United States in early 2020, the Trump administration, in conjunction with Congress, embarked on an unprecedented spending spree that would make even the most ardent Keynesian economists blush. The cornerstone of this economic intervention was the CARES Act, a staggering $2 trillion package that opened the floodgates of government largesse.
Under this act, millions of Americans received direct payments of $1,200 per adult and $500 per child, while unemployment benefits were supercharged with an additional $600 per week. Small businesses were offered a lifeline through the Paycheck Protection Program, which doled out hundreds of billions in potentially forgivable loans. Meanwhile, larger corporations weren't left out, with $500 billion earmarked for liquidity and debt purchases.
But the spending didn't stop there. The Federal Reserve, in lockstep with the administration's fiscal policy, slashed interest rates to near zero and embarked on a massive quantitative easing program, purchasing Treasury securities and mortgage-backed securities with abandon. Additional relief packages followed, including a $484 billion supplement in April and another $900 billion package in December 2020.
This begs the question: Is this the behavior of a true conservative?
The Republican Party, long the self-proclaimed bastion of fiscal responsibility and small government, seemed to abandon its core principles in the face of crisis. The scale of government intervention and the sheer volume of money injected into the economy fly in the face of traditional conservative economic doctrine.
Moreover, one must consider the inflationary implications of such massive government spending. While the immediate goal was to prevent economic collapse, (to enrich those standing closest to money printers) the long-term consequences of this unprecedented money printing exercise are yet to fully materialize.
The dramatic increase in the money supply, coupled with supply chain disruptions and pent-up consumer demand, has already contributed to inflationary pressures that we're grappling with today.
This approach establishes a troubling precedent for government overreach and fiscal irresponsibility. Authentic conservative policy should have prioritized targeted relief and market-driven solutions instead of broad stimulus measures and direct government intervention.
A more effective strategy would have been to implement robust checks and balances to prevent U.S. agencies like the National Institutes of Health and the U.S.-based EcoHealth Alliance from potentially releasing a virus through gain-of-function research at the Wuhan Virology Lab in China. It's essential to recognize that this significant oversight occurred under Donald Trump's administration.
Defenders of these inflationary policies might argue that extraordinary times call for extraordinary measures, and that ideology must take a back seat to pragmatism in the face of a global pandemic. However, it's hard to reconcile this level of government spending and monetary expansion with the principles of fiscal conservatism.
As we continue to feel the economic aftershocks of these policies, it's clear that the Trump administration's response to the COVID-19 crisis has blurred the lines between conservative and liberal economic approaches. Whether this shift represents a temporary deviation or a more fundamental realignment of conservative economic thought remains to be seen. What is certain, however, is that the inflationary consequences of these actions will be debated and felt for years to come.
In conclusion, the Trump administration's response to the lingering effects of the 2008 financial crisis was far from addressing the root causes. Instead of implementing meaningful reforms to prevent future crises, they largely continued and amplified the policies of quantitative easing and government intervention.
The CARES Act, passed in response to the COVID-19 pandemic, can be seen as a supercharged version of Obama’s earlier TARP program, injecting trillions of dollars into the economy through direct payments, business loans, and expanded unemployment benefits. This approach, while providing short-term relief, did little to address systemic issues in the financial sector or reduce wealth inequality.
By focusing on stock market performance and corporate tax cuts, the administration prioritized Wall Street over Main Street, potentially setting the stage for future economic instability.
While the market may be experiencing euphoria due to Trump's victory and the perception that he will deliver on his economic promises, it's crucial to remember the significant challenges facing the United States. The nation's $36 trillion debt looms large, and the country remains heavily dependent on imports. Moreover, the US is embroiled in two major geopolitical conflicts involving powerful nations like China, Russia, and Iran. These factors could potentially overshadow any short-term economic gains and pose long-term risks to the nation's financial stability and global standing.
Moving forward, it will be essential to look for signs of a shift towards sound monetary policy rather than getting caught up in the political circus of American politics.
The system has long been marred by kleptocratic practices, including insider trading, favoritism for corporate elites, and war profiteering. True economic progress and stability will require addressing these systemic issues and implementing policies that prioritize long-term fiscal responsibility over short-term political gains. Only by tackling these fundamental problems can the US hope to achieve sustainable economic growth and maintain its global leadership position.
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PS - I did not vote in the general election because it is my fervent belief that both candidates were horrible and did not offer true options for reform. Moreover, the Biden / Harris regime was the worst I have seen in my entire life. Lastly, I do think JD Vance has some potential, and I am hopeful Trump will nominate Judy Shelton to the Federal Reserve (which I wish would be abolished)
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