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Some Perspective on the Utter Foolishness of the Economic Aspects of "Make America Great Again"


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I just went through a great presentation by the co-founder of ECRI, which is one of the best economic forecasting and consultancies out there. Their work is always thoughtful and thought-provoking, even if the forecasts aren't exactly correct.

Some of it is a little esoteric, but I'll summarize the key parts:

1) The "good old days" when the US was the absolutely dominant economic force globally were an anomaly, historically speaking.

2) China and India were the dominant economies for most of recorded history. They fell far behind over the past two centuries, as Western Europe and then the US reaped the benefits of colonialism and the industrial revolution, but they have been rapidly making up ground over the past few decades.

3) For the US to reverse this trend, it would have to grow its real GDP at a rate of nearly 4% for a sustained period of time.

4) This is virtually impossible, because:

a) Potential GDP growth is a function of labor force growth and labor productivity growth. Basically it is the sum of the two. Demographics being what they are, labor force growth in the US is low: the outlook for labor force growth over the next several years is about 0.5% annually. Legal immigration accounts for over half of that. Reducing legal immigration and expelling significant numbers of illegal immigrants working in the US now would reduce labor force growth to near zero.

b) Labor productivity growth has been very slow recently. It averaged about 2.5% per year from 1950 to 2008, but is more recently averaging 0.5% per year. The reasons for this are complex and not fully understood, but the bottom line is that absent another technological step change the near future is far more likely to look like the recent past than like the second half of the 20th century.

ECRI's "'America First' in Perspective"

The bottom line is that Trump's immigration policies are likely to hinder, not help, growth. And absent somehow re-igniting the labor productivity growth engine, the potential for GDP to grow at a rate substantially above a real rate of 1-2% per year over a sustained period is virtually nil.

 

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You just need to look at Japan to see what an aging labor workforce does to the economy.  It does not take rocket science to realize we need able bodies willing to do work if we want to grow our economy.  But the immigration process needs to be structured and documented where people are screened and not the illegal stuff going on today where you get some undesirable elements.  Once sufficient numbers are allowed to get in legally, that will make it much easier to deport the undocumented ones which then will be mostly the undesirable ones/crooks. 

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As I have asked in multiple threads, "Where is the labor force going to come from to do all this work President Trump is proposing and still maintain the current work going on? Short answer is its all talk. The labor force isn't here to do the work.

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5 hours ago, RedmondLonghorn said:

I just went through a great presentation by the co-founder of ECRI, which is one of the best economic forecasting and consultancies out there. Their work is always thoughtful and thought-provoking, even if the forecasts aren't exactly correct.

Some of it is a little esoteric, but I'll summarize the key parts:

1) The "good old days" when the US was the absolutely dominant economic force globally were an anomaly, historically speaking.

2) China and India were the dominant economies for most of recorded history. They fell far behind over the past two centuries, as Western Europe and then the US reaped the benefits of colonialism and the industrial revolution, but they have been rapidly making up ground over the past few decades.

3) For the US to reverse this trend, it would have to grow its real GDP at a rate of nearly 4% for a sustained period of time.

4) This is virtually impossible, because:

a) Potential GDP growth is a function of labor force growth and labor productivity growth. Basically it is the sum of the two. Demographics being what they are, labor force growth in the US is low: the outlook for labor force growth over the next several years is about 0.5% annually. Legal immigration accounts for over half of that. Reducing legal immigration and expelling significant numbers of illegal immigrants working in the US now would reduce labor force growth to near zero.

b) Labor productivity growth has been very slow recently. It averaged about 2.5% per year from 1950 to 2008, but is more recently averaging 0.5% per year. The reasons for this are complex and not fully understood, but the bottom line is that absent another technological step change the near future is far more likely to look like the recent past than like the second half of the 20th century.

ECRI's "'America First' in Perspective"

The bottom line is that Trump's immigration policies are likely to hinder, not help, growth. And absent somehow re-igniting the labor productivity growth engine, the potential for GDP to grow at a rate substantially above a real rate of 1-2% per year over a sustained period is virtually nil.

 

Is there assumptions here that Trump is going to reduce legal immigration?  That an expulsion of illegal immigrants will not be filled by unemployed Americans?

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8 minutes ago, Higgs said:

Is there assumptions here that Trump is going to reduce legal immigration?  That an expulsion of illegal immigrants will not be filled by unemployed Americans?

Even if you got rid of all the  illegal immigrants in construction and replaced them with unemployed Americans there still wouldn't be the labor force to do all the construction type jobs the president is proposing. 

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14 minutes ago, Higgs said:

Is there assumptions here that Trump is going to reduce legal immigration?  

Didn't he just sign an Executive Order on H1-B visa reform with "Hire American" as a stated premise?  I know the order is aimed at revamping the system and doesn't explicitly talk about reduction in visa numbers, but the Order's premise does seem to provide some support for the assumption you reference. 

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The thing with all this construction work being proposed is people are going to have to get up and move to the work. Are the people in small town USA willing to do that? Right now jobs are going unfilled in the Denver area do to lack of a skilled labor force. 

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6 hours ago, RedmondLonghorn said:

I just went through a great presentation by the co-founder of ECRI, which is one of the best economic forecasting and consultancies out there. Their work is always thoughtful and thought-provoking, even if the forecasts aren't exactly correct.

Some of it is a little esoteric, but I'll summarize the key parts:

1) The "good old days" when the US was the absolutely dominant economic force globally were an anomaly, historically speaking.

2) China and India were the dominant economies for most of recorded history. They fell far behind over the past two centuries, as Western Europe and then the US reaped the benefits of colonialism and the industrial revolution, but they have been rapidly making up ground over the past few decades.

3) For the US to reverse this trend, it would have to grow its real GDP at a rate of nearly 4% for a sustained period of time.

4) This is virtually impossible, because:

a) Potential GDP growth is a function of labor force growth and labor productivity growth. Basically it is the sum of the two. Demographics being what they are, labor force growth in the US is low: the outlook for labor force growth over the next several years is about 0.5% annually. Legal immigration accounts for over half of that. Reducing legal immigration and expelling significant numbers of illegal immigrants working in the US now would reduce labor force growth to near zero.

b) Labor productivity growth has been very slow recently. It averaged about 2.5% per year from 1950 to 2008, but is more recently averaging 0.5% per year. The reasons for this are complex and not fully understood, but the bottom line is that absent another technological step change the near future is far more likely to look like the recent past than like the second half of the 20th century.

ECRI's "'America First' in Perspective"

The bottom line is that Trump's immigration policies are likely to hinder, not help, growth. And absent somehow re-igniting the labor productivity growth engine, the potential for GDP to grow at a rate substantially above a real rate of 1-2% per year over a sustained period is virtually nil.

 

It's nearly impossible to dominate the world economically if a large portion of it isn't lying in smoking ruins. But it's entirely possible to have the best economy with smart management and an educated workforce. We won't outpace the new powers like we once did but we can use their own strengths to our benefit and have a really good standard of living.

We won't accomplish any of this, however, with policies that worked fifty years ago and the people who support the president's wish to turn back the clock are hindering, not helping.

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1 hour ago, fantasycurse42 said:

4% growth, $1T in infrastructure spending, massive tax cuts, neutral deficit.

:lmao:

& the market buys this hand over fist

Don't forget protectionism and reduced immigration.  Bond market is already just as flat as it was before the election.

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Also the obvious idea that China and trade are killing American manufacturing jobs. Robots are killing American manufacturing jobs. Productivity is at all time high but it's being done with less and less people. We also seem to be facing a shortage of farm workers so the solutions are find a way to get migrant immigrants to come back to America in larger numbers or drastically increase the pay/benefits of farm work so that Americans will take those jobs. Ofcourse the latter solution comes with a big increase in food costs. We also have a serious college debt issue. College debt is double credit card debt and it's growing. People in their early 30s are starting less businesses and buying less homes. It seems to be correlated with student debt. Unless we find a way to reduce that debt, we could see some major spending problems over the next few decades. 

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42 minutes ago, Slapdash said:

Don't forget protectionism and reduced immigration.  Bond market is already just as flat as it was before the election.

But he is going to make great trade deals, best we've ever seen.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oh wait, China is gonna lube us up to help out with North Korea.

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1 hour ago, bigbottom said:

 

2 hours ago, Higgs said:

Is there assumptions here that Trump is going to reduce legal immigration?  

Didn't he just sign an Executive Order on H1-B visa reform with "Hire American" as a stated premise?  I know the order is aimed at revamping the system and doesn't explicitly talk about reduction in visa numbers, but the Order's premise does seem to provide some support for the assumption you reference.

 

:goodposting: 

ETA:  Though I'm not sure it's a safe assumption...it doesn't appear there's any sort of meaningful legislation coming out of the White House.  I don't think we have to worry too much of anything coming of this EO.

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2 hours ago, chet said:

The US grew from colonialism?

Of course his policies (assuming he follows them) will hinder growth but he wouldn't be president if he hadn't espoused them.

The US was created through colonialism. You could call our Westward expansion a form of colonialism too, though it doesn't fit the textbook definition.

But there is no question the rise of the West (as in Western Europe and the US/Canada) was driven by the twin engines of colonialism (initially) and the Industrial Revolution.

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7 hours ago, RedmondLonghorn said:

The bottom line is that Trump's immigration policies are likely to hinder, not help, growth. And absent somehow re-igniting the labor productivity growth engine, the potential for GDP to grow at a rate substantially above a real rate of 1-2% per year over a sustained period is virtually nil.

I was wondering where you were going with this.  Fact is letting is a zillion no skilled workers was never going to help and always be a drain.

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5 minutes ago, Sand said:

I was wondering where you were going with this.  Fact is letting is a zillion no skilled workers was never going to help and always be a drain.

Yes and no. Our agricultural industry is almost totally reliant on low skill immigrant workers. 

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2 minutes ago, Sand said:

I was wondering where you were going with this.  Fact is letting is a zillion no skilled workers was never going to help and always be a drain.

"Letting in a zillion no skilled workers" is a pretty handy strawman.

And I wasn't aiming at any one particular conclusion, but it is an obvious one.

Another obvious one is that when Steven Mnuchin suggests that the US can get to 4% GDP growth he is clearly full of ####, unless he is talking about for a few quarters. 

 

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2 hours ago, Higgs said:

Is there assumptions here that Trump is going to reduce legal immigration?  

No matter what the actual details of his policy end up being, it seems (still early and I don't know if hard numbers exist), the rhetoric and initial travel bad scare has created a perception that America's immgigration system is changing. Many foreign students come here for university with the knowledge they could build roots, use an HB1 Visa to gain employment and create a life here. The uncertainity is likely to reduce those numbers and push college students to Europe, Canada or to just stay at home. If we are to grow our economy, we need educated immigrants wth the aging boomers retiring amnd living longer combined with a lack of numbers to replace them in the work force. 

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Technically if the illegal immigrants are replaced by robots that are faster and able to work longer hours, labour productivity would go up, not down.

(I am fully aware that this does not create large swathes of jobs for unemployed or underemployed Americans, but it could move the needle on growth substantially without labor force growth - and there are likely other issues as well, but you get my drift)

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1 hour ago, Ilov80s said:

Also the obvious idea that China and trade are killing American manufacturing jobs. Robots are killing American manufacturing jobs. Productivity is at all time high but it's being done with less and less people. We also seem to be facing a shortage of farm workers so the solutions are find a way to get migrant immigrants to come back to America in larger numbers or drastically increase the pay/benefits of farm work so that Americans will take those jobs. Ofcourse the latter solution comes with a big increase in food costs. We also have a serious college debt issue. College debt is double credit card debt and it's growing. People in their early 30s are starting less businesses and buying less homes. It seems to be correlated with student debt. Unless we find a way to reduce that debt, we could see some major spending problems over the next few decades. 

That's certainly part of the problem, but I also wouldn't discount and economy that is becoming more and more an oligarchy (pick the word de jour to describe whatever our economy is these days) with much more limited opportunities to enter different market (ie barriers to entry are high).  Some of that is due to network effects becoming even stronger, but we've seem to become OK with companies slicing up the marketplace even when those effects are minimal.  

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2 hours ago, bigbottom said:

Didn't he just sign an Executive Order on H1-B visa reform with "Hire American" as a stated premise?  I know the order is aimed at revamping the system and doesn't explicitly talk about reduction in visa numbers, but the Order's premise does seem to provide some support for the assumption you reference. 

Aren't they also working on Muslim ban v 3.0, fighting for v 2.0 or somesuch. That would also tick in on the side of reducing legal immigration

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2 hours ago, bigbottom said:

Didn't he just sign an Executive Order on H1-B visa reform with "Hire American" as a stated premise?  I know the order is aimed at revamping the system and doesn't explicitly talk about reduction in visa numbers, but the Order's premise does seem to provide some support for the assumption you reference. 

Not that I've heard.  I think it's more likely that the H-1B allotments will increase.  

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12 minutes ago, Ilov80s said:

No matter what the actual details of his policy end up being, it seems (still early and I don't know if hard numbers exist), the rhetoric and initial travel bad scare has created a perception that America's immgigration system is changing. Many foreign students come here for university with the knowledge they could build roots, use an HB1 Visa to gain employment and create a life here. The uncertainity is likely to reduce those numbers and push college students to Europe, Canada or to just stay at home. If we are to grow our economy, we need educated immigrants wth the aging boomers retiring amnd living longer combined with a lack of numbers to replace them in the work force. 

That could happen I guess.  Hopefully not.

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8 hours ago, RedmondLonghorn said:

I just went through a great presentation by the co-founder of ECRI, which is one of the best economic forecasting and consultancies out there. Their work is always thoughtful and thought-provoking, even if the forecasts aren't exactly correct.

Some of it is a little esoteric, but I'll summarize the key parts:

1) The "good old days" when the US was the absolutely dominant economic force globally were an anomaly, historically speaking.

2) China and India were the dominant economies for most of recorded history. They fell far behind over the past two centuries, as Western Europe and then the US reaped the benefits of colonialism and the industrial revolution, but they have been rapidly making up ground over the past few decades.

3) For the US to reverse this trend, it would have to grow its real GDP at a rate of nearly 4% for a sustained period of time.

4) This is virtually impossible, because:

a) Potential GDP growth is a function of labor force growth and labor productivity growth. Basically it is the sum of the two. Demographics being what they are, labor force growth in the US is low: the outlook for labor force growth over the next several years is about 0.5% annually. Legal immigration accounts for over half of that. Reducing legal immigration and expelling significant numbers of illegal immigrants working in the US now would reduce labor force growth to near zero.

b) Labor productivity growth has been very slow recently. It averaged about 2.5% per year from 1950 to 2008, but is more recently averaging 0.5% per year. The reasons for this are complex and not fully understood, but the bottom line is that absent another technological step change the near future is far more likely to look like the recent past than like the second half of the 20th century.

ECRI's "'America First' in Perspective"

The bottom line is that Trump's immigration policies are likely to hinder, not help, growth. And absent somehow re-igniting the labor productivity growth engine, the potential for GDP to grow at a rate substantially above a real rate of 1-2% per year over a sustained period is virtually nil.

 

Yup.

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3 hours ago, Higgs said:

Is there assumptions here that Trump is going to reduce legal immigration?  That an expulsion of illegal immigrants will not be filled by unemployed Americans?

He has already reduced legal immigration slightly.  His Muslim/refugee ban was aimed at legal immigrants. 

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41 minutes ago, Sand said:

I was wondering where you were going with this.  Fact is letting is a zillion no skilled workers was never going to help and always be a drain.

No.  The fact is that unskilled labor is necessary for the economy, but that's short term thinking.  The important fact is that children of immigrants historically far outpace their parents and the general population in education, lifetime earnings, and contribution to the economy. You can say we don't want these unwashed immigrants on our shores, but we definitely want their American-born kids in 25 years. Those are usually the future of science, technology, and innovation in this country.

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2 minutes ago, Henry Ford said:

He has already reduced legal immigration slightly.  His Muslim/refugee ban was aimed at legal immigrants. 

The obvious, poorly thought out retort to this is "that might have happened, but it wasn't the intent so it doesn't really count".

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Agricultural exports are set to decline for a 3rd straight year.  This is a GDP crusher and is led primarily by China taking their goods to market in Canada/Mexico among other places.  

If this keeps up the US may end up being a net importer of food by the end of the Trump admin.  

You can talk robots and labor all you want, but you can't have 3-4% GDP growth without growing food exports, period.  

Guess who picks all those crops?  

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1 minute ago, The Commish said:

The obvious, poorly thought out retort to this is "that might have happened, but it wasn't the intent so it doesn't really count".

We just meant to keep out Refugees, not legal immigrants? You're right, that's not very well thought out.  

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3 hours ago, Mile High said:

Even if you got rid of all the  illegal immigrants in construction and replaced them with unemployed Americans there still wouldn't be the labor force to do all the construction type jobs the president is proposing. 

Prison labor force and force the deadbeats sitting around doing nothing to work.

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32 minutes ago, msommer said:

Aren't they also working on Muslim ban v 3.0, fighting for v 2.0 or somesuch. That would also tick in on the side of reducing legal immigration

We could double our visa limits and we still wouldn't be able to accommodate everyone that applies under current limits.

I would like to see us curb illegal immigration and expand legal immigration.

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48 minutes ago, Sand said:

I was wondering where you were going with this.  Fact is letting is a zillion no skilled workers was never going to help and always be a drain.

I am sure this is one of those areas where we will never agree on the facts, but I have seen a number of references over the years that show fairly convincingly that illegal immigrants are a net economic benefit for our overall economy.  The one major exception being unskilled, native-born laborers. 

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7 minutes ago, The Commish said:

The obvious, poorly thought out retort to this is "that might have happened, but it wasn't the intent so it doesn't really count".

Everything about their Muslim ban has been poorly thought out

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9 minutes ago, culdeus said:

Agricultural exports are set to decline for a 3rd straight year.  This is a GDP crusher and is led primarily by China taking their goods to market in Canada/Mexico among other places.  

If this keeps up the US may end up being a net importer of food by the end of the Trump admin.  

You can talk robots and labor all you want, but you can't have 3-4% GDP growth without growing food exports, period.  

Guess who picks all those crops?  

The U.S being a net importer of food is a huge missed growth opportunity. It's borderline shameful.

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1 minute ago, Grace Under Pressure said:

The U.S being a net importer of food is a huge missed growth opportunity. It's borderline shameful.

Farm relief/aid needs to be a central part of our economic strategy moving forward. For actual food growth, not fallow-field subsidies. 

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Neither I nor the ECRI presentation even touched on the other Trump policy idea that would be an absolute killer to long-term economic growth: protectionism. The good news here is that Trump seems to be walking back from his protectionist rhetoric a bit. I suspect it will largely fall by the wayside like so many of his other stupid pandering campaign promises have. Or I hope it will.

Congress could still royally #### up by pushing through a tax reform bill that includes a meaningful "border tax adjustment" though.

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1 minute ago, Henry Ford said:

Farm relief/aid needs to be a central part of our economic strategy moving forward. For actual food growth, not fallow-field subsidies. 

What? Why?

I think simply not taking away the ability of farms to harvest their crops would be good enough.

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Based on campaign rhetoric, this administration was shaping up to try and challenge the prevailing macroeconomic theories on many levels.  Perhaps due to political constraints, that challenge will be less forceful than it would have been, but make no mistake about Trump's wholesale rejection of standard macroeconomic theory in a global economy.

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17 minutes ago, culdeus said:

Agricultural exports are set to decline for a 3rd straight year.  This is a GDP crusher and is led primarily by China taking their goods to market in Canada/Mexico among other places.  

If this keeps up the US may end up being a net importer of food by the end of the Trump admin.  

You can talk robots and labor all you want, but you can't have 3-4% GDP growth without growing food exports, period.  

Guess who picks all those crops?  

 

7 minutes ago, Grace Under Pressure said:

The U.S being a net importer of food is a huge missed growth opportunity. It's borderline shameful.

 

2 minutes ago, jonessed said:

We aren't a net food importer.

Yes, the comment is "If this keeps up the US may end up being a net importer of food by the end of the Trump admin.", and that would be shameful. I do realize we aren't there yet.

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1 minute ago, The Z Machine said:

Based on campaign rhetoric, this administration was shaping up to try and challenge the prevailing macroeconomic theories on many levels.  Perhaps due to political constraints, that challenge will be less forceful than it would have been, but make no mistake about Trump's wholesale rejection of standard macroeconomic theory in a global economy.

I don't know if he rejects it so much as he has a total absence of understanding of it. 

Low information voters got us a low information President.

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6 minutes ago, RedmondLonghorn said:

What? Why?

I think simply not taking away the ability of farms to harvest their crops would be good enough.

Independent farm earnings have been horrible for years, with a short uptick a couple years ago.  It's one of the reasons they hire undocumented immigrants - it's all they can afford and keep the lights on. 

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2 minutes ago, The Z Machine said:

Based on campaign rhetoric, this administration was shaping up to try and challenge the prevailing macroeconomic theories on many levels.  Perhaps due to political constraints, that challenge will be less forceful than it would have been, but make no mistake about Trump's wholesale rejection of standard macroeconomic theory in a global economy.

He is a real estate guy. He likes inflation.  Not sure why this is hard for people to grasp. 

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