Donald Trump has never had many reservations about attacking the Federal Reserve. Last night, at a rally in North Carolina, he renewed his attacks on the Fed after it raised interest rates by a quarter of a point to 4 percent, which remains historically low. With inflation persisting at well over 2 percent, the hike was long overdue. The longer inflation is allowed to fester, the harder it becomes to tame.
For the self-described “King of Debt,” however, the Fed’s move was an intolerable affront. It is a reminder of the independence of a government agency, something that Trump regards with anathema. He, and he alone, is supposed to dictate economic policy. Trump, who launched a bogus criminal investigation into the former Fed chairman Jerome Powell, has been baying for rate reductions down to a minuscule 1 percent for the past few years. Trump, in other words, doesn’t want to run the economy hot, but at incendiary temperatures. So far, he has not targeted his new chairman, Kevin Warsh, but it’s probably only a matter of time before he goes into a hugger-mugger about Warsh’s supposed disloyalty.
Trump doesn’t want to run the economy hot, but at incendiary temperatures
For now, Trump is merely threatening to sever trade with some countries, including the European Union, to recoup American funds. Trump appears to believe that he can do whatever he pleases with no untoward consequences for the American economy. His economic theories could not be more novel. “If we wanted to get rid of deficits, which we could do with the swipe of the pen with every country, we’d make a trillion and a half dollars a year,” Trump explained yesterday. “We’d pay off our debt. We’d do all sorts of things. But we haven’t chosen to do that. But at some point, we will. Interest rates are too high.”
Well, no. One reason they are higher is because America, to borrow from Evelyn Waugh in Brideshead Revisited, has “got into Queer Street” with $40 trillion in federal debt. Another reason is that Trump launched Operation Epic Fury in late February – a little war in the Middle East that is turning into a big fiasco. Iranian-backed forces in Iraq have taken out Saudi Arabia’s east-west pipeline. The Houthis are on the march. And the Gulf states are rethinking their military ties to America.
Despite the Trump administration’s claims that the Saudi pipeline will soon be operational, this seems about as likely as its assertions that the Strait of Hormuz is open for business. The Washington Post reports that industry experts are stating that it will take several months to repair the pipeline. Americans are beginning to feel the pinch.
With oil above $100 a barrel, diesel and gasoline prices rose yesterday, particularly in the Midwest where they jumped by as much as 30 cents. In Texas, Florida and Claifornia, some stations have run out of diesel fuel. The strategic oil reserve is at its lowest ebb since 1982. Meanwhile, in North Carolina, Trump regurgitated his claim that “that war is going to end very soon. Trump was right about everything.” As the crowd remained silent, Trump insisted that “I’ve delivered on every promise I made.”
All of this has left the Republican party scrambling as the November midterms approach. The elections may well turn into Trump’s Waterloo. The RealClear polling average indicates that Democrats are outstripping Republicans in key Senate races – Texas, Ohio and Michigan – apart from Iowa. And a New York Times/Siena poll suggests Republican voters are starting to lose confidence in Trump as well. There are even hints that Kansas could go Democratic.
What’s the matter with Kansas? Ranchers and farmers are reeling from high fuel prices and fuming over Trump’s recent approval of the duty-free importation of 660 million pounds of mystery meat to lower the price of hamburgers. As the turmoil deepens at home and abroad, Trump, you could say, isn’t meeting the moment.
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