This week in Trumponomics: Trump gets rational

Rick Newman
Senior Columnist

Is President Trump softening? Let’s hope so. Trump agreed to a budget deal this week that forestalls the periodic hand-wringing over whether the U.S. borrowing limit will be extended. The so-called debt ceiling puts a limit on how much the Treasury Department can borrow, and since federal borrowing always goes up, the debt ceiling must be raised from time to time.

Congress has to pass a law to raise the debt ceiling, and the dickering over what other goodies end up in this must-pass legislation normally produces a down-to-the-wire showdown just as Uncle Sam is about to run short of money.

But not this time. The Treasury was likely to run dry in September, but Trump and Congressional Democrats reached a deal to suspend the debt limit until July 31, 2021. The deal, which Congress must still vote into law, also includes increases in federal spending levels. There could still be a government shutdown in October, if Congress doesn’t pass specific spending bills. But getting the debt ceiling and higher spending authorization out of the way sharply reduces the likelihood of such a disruption.

For these reasons, this week’s Trump-o-meter reads MEDIOCRE, the third-highest score.

Source: Yahoo Finance

Budget hawks, including some Republican Tea Partiers, criticized Trump for agreeing to a budget deal that increases spending and will lead to higher deficits. But Republicans already violated their self-proclaimed fiscal probity by passing the 2017 tax cuts, which substantially lowered government tax revenue. That is already leading toward annual deficits upward of $1 trillion.

In approving the deal, Trump seems to have followed the guidance of moderates in his Cabinet, such as Treasury Secretary Steven Mnuchin, who want to reassure markets through fiscal stability. That means Trump bucked the advice of hard-liners such as acting chief of staff Mick Mulvaney, who favors steep spending cuts and a combative approach toward Democrats. Trump, for once, chose peace over combat.

Perhaps he learned from the 35-day government shutdown at the beginning of the year that voters don’t really want him to blow everything up. The shutdown was a political loser for Trump, whose approval ratings fell as bureaucrats went unpaid and air-traffic controllers threatened to shut down airports. Threatening mayhem is okay, apparently, but enacting it isn’t.

Unprecedented peacetime government borrowing remains a problem, with the national debt now at a staggering $22 trillion. That’s not pinching the economy now, but at some unknowable point it probably will. Meanwhile, the darkest cloud over the economy is President Trump’s trade dispute with China, including the tariffs each country has placed on imports from the other. Maybe Trump will get rational about that, too.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman

Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

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