Trump’s call for emergency stimulus is just pure politics

It’s now clear that Donald Trump is in full-blown panic over the failure of his economic policies to deliver the promised results. Second, he’s clueless about why his policies aren’t working, or about anything else involving economic policy.

Let’s talk about one indicator of Trump’s cluelessness: his remarks about federal debt.

In addition to demanding that the Fed cut interest rates below zero, Trump declared that “we should then start to refinance our debt,” because “the USA should always be paying the lowest rate.” Observers were left scratching their heads, wondering what he was talking about.

Actually, however, it’s fairly obvious. Trump thinks federal debt is like a business loan, which you can pay down early to take advantage of lower interest rates. He’s clearly unaware that federal debt actually consists of bonds, which can’t be prepaid (which is one reason interest rates on federal debt are always lower than, say, rates on home mortgages). That is, he imagines that the government’s finances can be managed as if the U.S. were a casino or a golf course, and it never occurred to him to ask anyone at Treasury whether that’s how it works.

But back to the economy. Why is Trump panicking? After all, while the economy is slowing, we’re not in a recession, and it’s by no means clear a recession is even on the horizon. There’s nothing in the data that would justify radical monetary stimulus — stimulus, by the way, that Republicans, including Trump, denounced during the Obama years, when we really needed it.

Furthermore, despite Trump’s claims that the Fed has somehow done something crazy, monetary policy has actually been looser than Trump’s own economic team expected when making their rosy forecasts.

But while there’s no economic emergency, Trump apparently feels he’s facing a political emergency. He expected a booming economy to be his winning issue next year. If economic performance is mediocre at best, he’s in deep trouble.

Remember, Trump’s two signature economic policies were his 2017 tax cut and his rapidly escalating trade war with China. The first was supposed to lead to a decade or more of rapid economic growth, while the second was supposed to revive U.S. manufacturing.

In reality, however, the tax cut delivered at most a couple of quarters of higher growth.

At the same time, the trade war has turned out to be a major drag on the economy. The general expectation was that Trump would deal with China the way he dealt with Mexico: make a few mainly cosmetic changes to existing arrangements, claim victory, and move on. Once it became clear he was really serious about confrontation, however, business confidence began falling, dragging investment down with it.

And voters have noticed: Trump’s approval rating on the economy, while still higher than his overall approval, has started to decline. Hence the panicky demandss.

But while Trump realizes he’s in trouble, there’s no indication that he understands why. His instinct is always to blame someone else.

So what happens next? Trump could reverse and do what most people expected a year ago, reaching a deal with China that more or less restores the status quo. But that would be admitting defeat — and it’s not clear why the Chinese would trust him. The fact is that when it comes to economic policy, Trump has trapped himself in a bad place.