Posted: 7/21/2019 Updated: 7/22/2019
President Trump’s three major challenges are:
Fiscal irresponsibility and fiscal profligacy: The federal deficit is sliding again from roughly $600 billion in 2016 to now about $1 trillion dollars. This can not go on!
Dangerous federal indebtedness: As a consequence of out of control deficit spending, the federal debt stands now above $22 trillion or about 105% of GDP. Since the year 2000 ($5.7 trillion or 54% of GDP) , federal debt has nearly quadrupled! This cannot go on!
Reckless and irresponsible monetary policy: Since Fed Chairman Alan Greenspan were the short term interest rates kept artificially at historically very low values. These irresponsibly low interest rates have allowed the public and private sector to pile on more and more debt like never before!
Seriously complicating matters is the fact that the federal deficit and the ultra low interest rates are intrinsically linked. A one percentage point rise in the long term interest rate would very quickly and significantly increase the federal deficit via higher federal expenditures on servicing federal debt.
President Trump could certainly address the first challenge either by aggressively shutting down irrelevant federal agencies or by massively downsizing or even privatizing federal agencies as much as is possible! The federal government and all its agencies is bloated! To some extent, I believe, Trump is working on this already.
So far President Trump has largely ignored these three challenges to the peril of the American economy. Left unmitigated, these challenges have the power to undermine the standing of the U.S. in global politics!
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