OPINION:
President-elect Donald Trump has a mandate to implement populist policies, but like President Biden, he is inclined to extreme solutions, which jeopardizes his chances for success.
Inflation kills.
When Mr. Biden assumed office, the economy was reeling from COVID-19. Against the advice of leading macroeconomists, he overreacted by sending $1.9 trillion in aid to families and the states too soon after Congress had authorized $900 billion in COVID-19 relief.
He overspent on infrastructure and industrial policies to strengthen the electric vehicle, semiconductor and other green industries, pushing the budget deficit to 7% of gross domestic product.
The Federal Reserve enabled this foolishness by printing money to buy bonds and keeping interest rates low. Inflation burst, ultimately reaching 9.1%.
Mr. Biden’s job approval ratings tanked, Democrats lost the House in the 2022 elections and Mr. Biden and later Vice President Kamala Harris carried his burden into the 2024 campaign. Despite a strong economy and inflation falling close to the Fed’s 2% target, the Republicans accomplished a trifecta.
Mr. Trump wants to deepen the personal and corporate income tax relief in his 2017 federal tax overhaul, boost the military and spend on other initiatives. Elon Musk can’t slash enough waste from federal spending to pay for all that — discretionary programs are only 17% of the budget.
If House Republicans agree to fund most of Mr. Trump’s promises, inflation will soar again, and they will lose their majority in 2026.
The Fed is (almost) untouchable.
Mr. Trump loves to harass the Fed about interest rates, but Mr. Biden is no altar boy.
As inflation heated up, the White House promoted the idea that temporary, COVID-induced supply constraints were the culprits, not overspending.
The Fed should have been aware of the perils of monetizing Mr. Biden’s deficits. But as inflation persisted and accelerated in the spring and summer of 2021, Mr. Biden delayed his decision on appointing Chairman Jerome Powell to a second term, and the Fed continued printing money — the coincidence is inescapable, even if subtle.
Inflation ultimately proved difficult to put back in the bottle because Mr. Powell played along too willingly with those who dismissed the rise in inflation as transitory.
The statutes and legislative history are plain. The Congress established the Fed as an independent body.
Until Mr. Trump can appoint new governors, he should restrain his impulse to attack the institution and not set himself up for an embarrassing loss in a conservative Supreme Court by trying to subordinate the Fed or oust the chairman.
Illegal immigration poses a dilemma.
On immigration, Mr. Biden and Mr. Trump are inclined to lemming to opposite extremes.
Mr. Biden reversed virtually all of Mr. Trump’s tough border policies, and the resulting rush of illegal immigrants is a matter of public record. But Mr. Trump’s promised deportations would wreck the economy. Period.
The economy was at full employment in the summer of 2023. Yet it kept growing at 2.5% by adding 100,000 plus irregular immigrants monthly to the workforce, especially in agriculture and food processing, construction, cleaning and many other low-wage services.
Mr. Trump can round up criminals, security threats and other illegal immigrants with deportation orders. If he goes beyond that, crops won’t be harvested, grocery prices will soar, familiar faces that clean homes and work in restaurants will disappear and Americans, in a reflex of remorse, will vote for Democrats in 2026.
Go easy on trust-busting.
Mr. Biden’s antitrust appointees pursued many of the same policies as Mr. Trump toward Big Tech.
The Google case, which has been much in the news, began on the latter’s watch, but Mr. Biden’s appointees at the Justice Department and Federal Trade Commission are watching how Big Tech could potentially monopolize artificial intelligence.
AI has the potential to raise annual economic growth to 3.5%, but investment in servers, the cloud, software and the electrical grid will rise well above $1 trillion per year. Big Tech is one of the few places, and perhaps the only one, where that kind of loose change can be found.
Search ads contribute more than half of Google’s revenue. Forcing disinvestment of its browser would be chilling. More modest remedies for its abuse of the search engine, such as squashing Google’s tactics that compel the adoption of its other products, make more sense.
Big Tech is like Big Oil and Detroit’s Big Three in times past, forces whose benefits come with costs. But the country simply can’t afford to constrain the AI revolution — if our tech companies do not finance it, China will surpass us.
Hyperbole is inevitable in political campaigns, but outside of making war, good governance is best served by the golden mean — moderation in all things. For example, boost tariffs on China thoughtfully but stop threatening friends with across-the-board duties.
To be successful, Mr. Trump must restrain his tropism to the extreme and embrace moderation. With him, that is a big ask.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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