Trump can help the working class

Let Federal Reserve create money to stimulate economy

I didn’t vote for Donald Trump, but I can suggest a positive idea that perhaps only he could do, just because he is so wild and unconventional — something that would actually produce better jobs for the working class people who made him president, something no Democratic president would even try.

He could help Congress and the American public understand that it is possible to run a strong economy without budget deficits and without increasing our national debt. He could introduce legislation to permit the Federal Reserve to create the money we need to stimulate our economy and keep it running strongly all the time.

All economists know that if the government spends more and/or it taxes less — that is, to run a budget deficit — it will cause the economy to run hotter and create more jobs and more output. But most people think budget deficits are a bad thing because they increase the national debt. So we settle for economies that are lackluster, even when more budget stimulus would produce the jobs we lack.

Budgetary stimulus supplies extra spending or “demand” in the economy. Then people in Michigan and anywhere else who have lost their jobs to foreign competition, or outsourcing, or automation do not remain unemployed very long. In a “hot” economy, they would soon find new jobs, perhaps with some retraining or relocation assistance.

The economy was at full capacity like this in the late 1990s. There was even more foreign competition back then, and plenty of robots being introduced, but everyone who was displaced could find a new job because there was so much demand in the economy. Inflation was still very moderate — 2 to 3 percent.

There is no reason that we can’t operate our economy like this all the time. Our fearless new president can convince Congress to allow the Federal Reserve, in its discretion, to create the money needed for stimulus each year and add it to the Treasury’s account. It would then be up to the president and Congress to decide how to spend this new money — on infrastructure repair and replacement, for example.

Every year the Federal Reserve should look at how the economy is doing — is it too cold, like it still is today, or is it too hot, where everyone has a good job but inflation is threatening? If the past is a guide, most of the time it will be a little too cold, requiring some stimulus. The Federal Reserve could make enough new money available to Congress and the president to bring the economy back up to its potential when it is lagging. The national debt will remain the same or decline forever.

This will not cause instant hyper-inflation, like in Germany in the 1920s or Zimbabwe more recently. Those were failed states where governments unable to tax resorted to printing money to meet its expenses. This is guaranteed to cause inflation.

That’s not what I’m talking about. You can over-do just about anything.

The Federal Reserve’s calculations do not have to be exact. If they underestimate and employment lags a little, they can furnish more money the following year. If they overestimate and inflation goes up from 2 percent to 4 percent, it’s not the end of the world; they can cut back the following year.

The only issue people raise with this idea is that politicians are bound to “abuse” it. Well, voters hate inflation more than anything. If the politicians over-do it, they will find themselves causing inflation one day and out on the street the next day. That’s the way democracy works.

Donald Trump’s election focused the spotlight on working class Americans who feel left out of the new economy. If the presidentelect has the guts to support a new idea that will actually bring these folks and other Americans back into the economic mainstream, maybe it will make up for a pretty nasty campaign.