A Government in Paralysis
Author: Greg Valliere
August 20, 2019
IF YOU TALK WITH PEOPLE IN BOTH PARTIES IN THIS TOWN, a disturbing narrative becomes clear: government policy is ad hoc, subject to change at a minute’s notice, rarely vetted with experts, hamstrung by widespread vacancies in every Cabinet agency. Yesterday offered several examples:
The president, privately fearful that the economy is slipping, is considering tax cuts, the deficit be damned. But by the afternoon, the White House issued a denial that a payroll tax cut is on the table. That’s not quite accurate; an economic contingency plan is taking shape.
The president, who got an earful from business officials last week, finally acknowledges (in private) that the tariff war is hurting the economy, the markets, and consumers. A trial balloon to abandon some of the tariffs was floated yesterday morning, only to die by evening. Will new tariffs against China take effect as scheduled on Sept. 1? No one knows for sure.
An all-out assault on Jerome Powell is coming; the president is convinced he has the authority to oust the Fed Chairman, or at least demote him. There’s nothing Powell can do on Friday at Jackson Hole that would please the president — other than resign, of course.
Background checks on gun purchases, considered likely just a one week ago, apparently have been abandoned by the president in the face of opposition from the right wing and the National Rifle Association. An ill-defined crusade against mental illness is the fallback.
Two of the remaining heavyweights in the Cabinet — Mike Pompeo and Stephen Mnuchin — are thinking of leaving this fall. Pompeo knows that ISIS and the Taliban haven’t been defeated, yet the president wants to disengage. Mnuchin is exasperated on trade, and both are grappling with enormous unfilled vacancies.
The president, to his credit, works the phones constantly, speaking with Republicans, Democrats, business leaders and wealthy backers. They offer conflicting advice, a major reason why the president changes positions so readily; at the end of the day, he only listens to a handful of aides, including Peter Navarro and Ivanka Trump.
Navarro, who is loathed in the markets and the media, has become the face of White House economic policy — eclipsing Larry Kudlow, who reportedly is demoralized. Kudlow has lost the battle on trade, the Fed and the dollar.
Despite the dysfunction, there’s a strong belief in the White House that the president has a good chance of winning re-election; Joe Biden is considered a very shaky opponent. The president is his own press secretary, winning enormous air time on the White House lawn as he comes and goes; he’s merciless toward his opponents, he loves the battle and he has no filter.
WHAT STANDS OUT TO US is a lack of any consistent policy — budget deficits suddenly are fine; the economy is great shape but needs help; dissidents in Hong Kong get little support from a Republican president, etc. This is the most volatile and rudderless climate we’ve ever seen in Washington, and that volatility is now taking hold on Wall Street, where investors increasingly worry about getting blindsided by this exceptionally erratic president.
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