Review of Economic Policy from the White House
Current US Economic Policy Explained
Many people nowadays filter everything that comes out of the White House in terms of their own political viewpoint. Successful investors will check their political opinions when trying to understand current economic strategies: how might the various programs and initiatives impact investment portfolios? In a recent Wall Street Journal[1]editorial, Treasury Secretary Scott Bessent lays out the case for current US economic policy. What is he saying?
Three Point, Interconnected Policy
To paraphrase, Bessent describes how the global economy of the past several decades produced great wealth, but did not distribute it very well. The stock market boomed; many people thrived in this system. But the gains of the markets didn’t also translate into gains for the working-class Americans. Real wages for middle class workers have stagnated for decades. As jobs moved overseas, the communities left behind struggled to recover.
MAGA policymakers seek to provide an alternative to this uneven system. A new policy framework is being introduced, one that seeks to prioritize working families and communities in the heartland. Bessent describes three interconnected component parts intended to spur growth for both Main Street and Wall Street:
- Renegotiate Trade. They aim to renegotiate global trade, using tariffs to gain concessions from countries they see as having unfair trade agreements with the US. The expectation is that this could level the playing field for domestic producers and generate revenues.
- Reform Tax Policy. Proposed tax policy changes are not as dramatic as wholesale disruptions in other sectors and parts of government. They seek to make permanent the 2017 Tax Cuts and Jobs Act and also implement new programs such as no taxes on tips, overtime, or social security income: programs which impact working class families.
- Deregulation. Regulation has long been seen by republican faithful as equivalent to unnecessary cost on business. Reduce regulation, the logic goes, and businesses will naturally flourish.
Suboptimal economic policy? Depends on your priority.
What to make of Bessent’s commentary? Markets and investors reacted with great skepticism as the administration’s economic plans have been rolled out. Some observations:
- Prioritize the working class. A stable and thriving middle class is a bedrock requirement for a stable society. Income disparity has been a growing problem in the US for decades, one of our biggest challenges.
- More managed than free trade. The MAGA-transformed GOP is apparently no longer the party of free trade. Moving tariffs to the center of their economic policy makes the US economy more managed, engaged, and intrusive than it has been in decades. This could bring benefits to targeted groups such as the domestic manufacturing sector and may well also bring myriad negative unintended consequences and inefficiencies.
- Inflation. Given that reducing inflation was a central campaign promise, it is notable that the administration is now searching for ways to justify the likelihood of higher inflation: the tax revenues will be worth it, the gains for the middle class will be worth it, the pain will be short term and worth it. Time will certainly tell how voters react as this plays out…
- Timid Tax Policy? Plans announced to date seem relatively subdued when compared to the level of disruption wrought by this administration in other sectors and parts of government. Now that they own the Federal budget, perhaps they recognize just how important these revenues are.
- Transition Timing. Prompt results may be tough to generate. Even if they are successful in moving US manufacturers back to the US, the process of re-establishing operations could take a long time. Apple, for example, has spent many years developing a sophisticated global supply chain in order to bring iPhones to us at acceptable price points. It seems very unlikely that they could/would move everything to the US within the next few months.
Good, Bad, and a Glaring Omission
Bessent’s editorial, while welcome, seems a bit reactionary. At very least, it is positive that the administration is at last taking time to articulate the overall macroeconomic game plan. It might have been easier on everyone if they had published this editorial back in January. And it is important to point out that the piece places precious little emphasis on deficit reduction, an earlier focal point of the administration’s efforts. Overall, I think it boils down to a question of priorities. Which wolf (hungry stakeholder) are they seeking to feed first? If your priority is to have the most efficient and optimized economy, you’re probably not happy with this scheme. But if your priorities are more local, if you’ve watched your town and region decline as good jobs moved to China and working families were left behind to fend for themselves, you may see this very differently. You might be willing to take a “suboptimal” macroeconomic outcome if your children can look forward to a dependable and stable future.
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[1] “Trump’s Three Steps to Economic Growth” the Wall Street Journal, May 4th 2025 editorial