Today, almost two months later, Bloomberg’s Laura Davison reports Mnuchin has set aside a middle-class tax cut in favor of “fixing mistakes in the 2017 overhaul.” When asked by Bloomberg whether there really was a middle-class tax cut in the works, Mnuchin replied, “I’m not going to comment on whether it is a real thing or not a real thing.”
One must step back and marvel at the Trump administration’s ability to deny whether something is real. Perhaps we could call this Schrödinger’s economics.
The impressive thing is that Mnuchin’s statement was less absurdist than other high-profile economic statements coming from the administration. For example, in a morning full of unfocused Trump tweets, this one stood out:
Ah, yes, I remember when I was studying for my comprehensive exams in economics grad school. I was struggling to remember two-stage least-squares regression techniques when Nobel laureate Kenneth Arrow leaned over and said, “trust your feelings, Luke,” and then I blew up the Death Star. Or something Dadaist like that. It makes about as much sense as “feel the market, don’t just go by meaningless numbers.”
It certainly makes as much sense as the Wall Street Journal editorial by Stanley F. Druckenmiller and Kevin Warsh that Trump referenced. The gist of the column was that the economy was softening and that the Fed should not raise rates or pursue a contractionary monetary policy. That’s a not-entirely-crazy opinion, but this is the Wall Street Journal editorial page, which means that the authors need to rationalize calling for a tighter monetary policy for the last eight years but not now. Their answer? “The time to be more hawkish was earlier in this decade, when the economic cycle had a long runway, the global economy ample momentum, and the future considerably more promise than peril.” So, in other words, the time to pursue a contractionary monetary policy was when growth was lower and unemployment was higher. I only got a master’s in economics, but I don’t think I would have passed my macroeconomics comp with that answer.
The Trump administration’s postmodern pièce de résistance, however came at Tuesday’s White House briefing. ABC’s Terry Moran asked Sarah Sanders to explain her claim that U.S. taxpayers would not be paying for the border wall. Sanders’s response... well... just watch the entire glorious exchange below:
Sanders seems to be echoing what Trump said earlier in the week about USMCA being such a great deal that the U.S. government would earn more in tariff revenue or more taxes from greater economic growth. But Moran’s look of incredulity matches the facts on the ground. As Phil Levy explains in a Forbes column, there is simply no way that the USMCA will raise revenues sufficient to pay for a wall. The new trade agreement — which, bear in mind, has not even been ratified yet — is simply too similar to NAFTA to generate the kind of revenues Trump and Sanders claims.
On Monday I argued that the Trump administration was not guilty of intentionally screwing up the political business cycle. After today, however, I fully accept the likelihood that they blundered into it by accident.
Prior to becoming president, Trump had a lot of experience declaring that good economic numbers were actually horrible ones. The true strength of the Trump administration’s postmodern economics will be put to the test if and when the president tries to claim that lackluster numbers are good ones. Tuesday was good practice for their attempt at postmodern economic policymaking.