Joe Biden was elected president for basically one reason–the general public on the margin wanted an end to perceived Trumpian chaos and a return to normalcy. Mr. Biden had promised to be that candidate–bring us back to normal and he would be a caretaker until the next generation of leaders would arrive. And then in Jan 2021, the sycophants surrounding him started manipulating an aging man who always had a very large chip on his shoulders with the whispers, “you can be more consequential than almost any other president in history–the next FDR–you can be a transformational president!” That stroking of a prideful man’s ego led Mr. Biden, with a 50/50 Senate, to proceed down a path that embraced the most radical social and economic agenda of any president in my lifetime. He pursued this radical agenda that only the small hyperpartisan progressive base embraced, and wouldn’t listen to those voices of reason within his own party about the consequences of his policies. When told his Inflation Reduction Act would lead to inflation, Mr. Biden said that no economist agreed with that view, ignoring not only your favorite BATG economist (shock!) but also Dr. Larry Summers, former Treasury Secretary under Bill Clinton, who almost alone on the left spoke up as a matter of intellectual integrity for the good of the country. Most people in each tribe will just go along to get along, like the 15 Nobel Prize winners who endorsed what became the IRA, so Dr. Summers’ stock went up tremendously in my eyes. Nevertheless, we all know the result–Mr. Biden’s refusal to consider sound economics in pursuit of satisfying a minor part of the electorate helped unleash the highest inflation in decades and drove the country down a path of misery.

Mr. Trump was elected with a solid but not dominating win. The strength was surprising given the runup in the polls, but given the weakness of his opponents and the terrible record of their policies (especially compared to the relatively successful pre-covid Trump I policies), it was not a very strong victory by historical standards. Yet in a 50/50 divided America, Mr. Trump clearly had a mandate. But as I’ve argued, that mandate was very limited: 1) get costs down, 2) get the border under control, and 3) stop the social engineering insanity of the left. Contra the Trumpians, Mr. Trump has no mandate to do anything that pops into his head, nor to do every random comment that he made on the campaign trail. If he wants to pursue all those things he said as a matter of doing what he promised, that’s all well and good, to the extent that it doesn’t conflict with what he really has a mandate to do, which are the three things I just stated. Further, Republicans in the House and Senate don’t work for Mr. Trump and have no responsibility as co-equal parts of government to go along with every one of his ideas. In fact, I argue that they will serve Mr. Trump (and themselves and their party) well by restraining his most eggregious behaviors and ideas. With the very narrow margin in the house, the President only has a year to get anything done. And if he doesn’t have good results in a year, you can be sure that the Republicans will lose the House and he will be the lamest of ducks at that point.

But at this point, Mr. Trump is perilously risking his 2nd term by his insisting that he was elected to declare economic war on the rest of the world. Not simply China (where there is some justification for reconsidering trade policies), but virtually the entire world, including our biggest trading partners (Canada and Mexico) The stock market has reacted quite negatively (we’re in correction mode now in most indices) and the “Trump Bump” euphoria in the market has been completely decimated. Mr. Trump, who loves to crow about the market going up when it’s in his favor, and who disparaged Mr. Biden for being a threat to the market, is now reduced to telling us to ignore markets–they’re basically irrational. In other words, the collective wisdom of millions of investors about what Trump policies might mean for future economic performance should be ignored, “just trust us.” Most studies I’m seeing that are trying to model various Trump tariff proposals (which is so hard as they change by the hour) suggest a reduction of GDP growth of about .5%. Now this doesn’t mean we go into a Great Depression a la Smoot-Hawley*, but the compounding effect over time is quite large, and will leave future generations much poorer than they otherwise would be. But the real issue that there is no getting around is that if significant tariffs are implemented, it will raise prices–not just of imports, but of everything we produce that competes with imports (as increased demand for domestic production will increase prices), as well as everything that uses foreign-produced inputs. Mr. Trump now has to acknowledge that there will be short term pain, but “it will be worth it” and “we have to do it.” And he is doubling down on this approach. It’s hard to get too carried away as there is literally nobody that knows what his policy goals really are (which is absurd that we have a president that we don’t really know what his proposals are trying to do), as these tariffs could all go away tomorrow. Other countries might buckle under his threats, make modest changes and Mr. Trump could declare victory. Or he might not. Right now job #1 is to get prices down, and everything he is doing will make those prices go up. And he doesn’t have much time politically, as I’ve noted above. And poor people are already out of time, as shown in this news report from Dollar General showing their customer base is severely stretched due to high prices. As Don Boudreaux and Phil Gramm say in today’s WSJ:

Protectionism has an unblemished record of failure both economically and politically throughout American history. Yet the Trump administration seems determined to employ protectionist policies that failed the first time it employed them and that have never spurred economic growth. Protectionism now threatens not only the prosperity that could be created with deregulation, budget-deficit reductions and tax cuts, but also imperils America’s world leadership and the peace and prosperity that leadership has produced.

If Mr. Trump continues down this path in pursuit of his dreams of a different kind of American economy against what he was elected to do (get prices under control), he and we will have a very troubling next 3.5 years. Maybe he can take Mr. Biden down to Mar-a-Lago and commiserate over a round of golf.

* which did exacerbate and accelerate the decline in economic activity during the depression, but the root cause was monetary mismanagement, which hopefully we won’t have in addition to Trumpian Tariffs.