Things that really inflame the president
I see two things that DJT (Donald J. Trump) is really inflamed over that are obviously of extreme importance to him. One is the Fed increase in interest rates slowing his economic parade of growth. He is adamant in turning that around and jawboning the Fed into reducing interest rates to further support his strong economy. He realizes that his trade war weighs on the U.S. economy even though he says the opposite. He needs lower interest rates to offset that.
The economy is the one thing that a majority of Americans say that they approve of. It is the base of his political support and the key to any possibility of his re-election in 2020. If the economy slows, he will not be re-elected unless the Dems really screw up (again). While he has never had majority positive approval ratings he has not cared as election day is a long way off. He only has to be ahead in the polls one day to be re-elected if that is election day. The rest is just noise. As soon as the Dems pick a candidate, Trump’s polls go up. He is much more unfavorable when there is no Dem to compare to him. Yet if he cannot keep the economy rolling, even a flawed Democrat may beat him. Right now, the Dems cannot even imagine Trump not being re-elected and that will keep them in over-confident denial.
Trump has put on an all-out disparagement campaign against the Fed and Fed Chairman Jerome Powell in what is an attempted hostile takeover of the Fed. He is nominating “his people” to the board that will politicize the Fed for what he sees as his political survival. Besides that, he wants to weaponize the Fed to use in his trade wars manipulating the US dollar. When he puts tariffs on trade partners that hurts them economically and is reflected by weakness in their currencies. That would be a normal market reaction but he doesn’t like it as it waters down the impact of his tariff. If he puts a 10% tariff on someone and their currency declines 5 percent the net tariff is only 5 percent. I think that most of the time this results from market forces reflecting the correct economic reality, but DJT disagrees, thinking it is currency manipulation. He wants to be able to go after trading partners with both tariff and currency attacks.
The Fed thinks that this is totally out of its mission which has traditionally been to support employment and control inflation. Trump wants to drastically expand that mission and control monetary policy from the White House. In my opinion the Fed has been functioning very well as an apolitical institution and having any president in charge of the Fed is a recipe for disaster. The people that he is nominating to the Fed have a track record of what they have previously advised the Fed should do. They include adhering to a gold standard and raising interest rates when in a recession. . .things that seem absurd. The one and only thing that Trump really cares about is that they do what he what he wants them to. The reason that long term interest rates are as low as they are is because of market confidence in the Fed controlling inflation. When that confidence is lost when DJT starts setting Fed monetary policy, long term rates, now historically low, will go up. The long term has never bothered DJT. Long term to him is 2021.
The Fed is under a full-scale assault from the White House where this president wants control of the levers of our central bank so that he can use it politically to his benefit and as a weapon in his trade war. He sees control of the Fed as his ticket to a second term.
I began this column with the sentence that there were two things that DJT is incensed over, the one discussed being control of the Fed. The second one is the addition of a question on the US Census asking about citizenship. The Supreme Court nixed the initial effort to get the question of citizenship added to the Census. Trump’s Justice Department tried and failed to come up with a legal argument to overturn the ruling and Commerce Secretary Wilbur Ross conceded to go ahead with the Census without the citizenship question before trump again intervened. The Census was intended to count the population living in the country at a given time regardless of citizenship. It is an important finding as it is used to allocate Congressional seats, electoral votes and funding for government programs. The demographics in this country are seeing ethnic and racial minorities move into the majority in some states. These minorities tend to vote for Democrats which is the primary reason that Trump wants to hold the number down. He thinks that the question asking about citizenship will be threatening to undocumented immigrants who then would not be counted in the Census. He is very much focused on the demographics of Texas. There has been strong emigration into TX from Mexico and the kids of these immigrants are citizens who vote. TX, which has been a red state, is turning purple on a demographic path to turning blue. Trump wants to slow that down if he can. TX would appear poised to pick up three new Congressional seats in the coming Census. It has 41 electoral votes. Each progressive election likely puts the Dems closer to winning there. The addition of a citizenship question is intended to create an undercount in the Census.
The GOP is a minority party, who until the last Congressional election held majority control of both Houses of Congress and the White House. How is that electoral feat accomplished? It is a combination of a lot of things such as jerrymandering and voter suppression, but the driving force is also getting their base out to vote. The point in Trump’s adamant desire to add a question to the Census on citizenship is to limit the impact of demographics not giving the Dems any more help than can be avoided. Democratic representation is not on the side of the GOP as they now lose national elections based on plurality. This is a struggle for power and they will do whatever they can to blunt the impact of the demographic flows going against them. This fear of demographics is at the heart of his immigration policy. Immigrants are seen as a long-term political threat to the GOP, which you hear them cite as “losing the country”.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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