The Great Trumpian Inflation

When it comes to today’s raging stagflation, all roads lead back to Donald Trump’s disastrous economic stewardship during 2017 through 2020. That span encompassed the final years of the post-Great Recession recovery and even by the lights of milquetoast Republicanism was supposed to be a time in which monetary and fiscal policy would be resolutely normalized.

To be sure, we don’t cotton much to the idea that financially cleansing recessions like the downturn of 2008-2009 should be aggressively countered with large-scale fiscal deficits and central bank money-pumping. That’s just a long-standing Keynesian cover story for expansion of the state by Washington’s permanent ruling class of careerist uniparty pols, Deep State apparatchiks and MSM media shills.

Indeed, in modern times Republicans were usually on the watered-down “stimulus” bandwagon during recessions, with the brief interlude of 1981-1982 being the only exception. In the latter case, the “stimulus” cure was explicitly rejected by Ronald Reagan’s brand of small state Republicanism because he was old fashioned enough to recognize that recessions are needed to purge inflationary excesses of debt, spending, malinvestment and speculation, and therefore need to be allowed to run their course.

Still, even during those surrounding years of GOP apostasy culminating in Bush-the-Younger’s pathetic anti-recession rebate checks to the American populace in May 2008, Republicans at least insisted that once the so-called “emergency” was over deficits needed to be reined in and, ideally, extinguished before the next economic downturn. And it was also assumed that the Fed would do its part to bring interest rates and financial conditions back to normalcy.

Not Donald Trump, however. On the fiscal side, the steady march to normalcy during the Obama Administration, when the deficit dropped from $1.4 trillion at the bottom the the Great Recession to $580 billion in FY 2016, was dramatically reversed by Trump-O-Nomics. Even before the egregious fiscal insanity of the 2020 pandemic stimmies, the Federal deficit had soared back to $983 billion by FY 2019.

Thereafter, of course, it was loony tunes time. The FY 2020 and FY 2021 deficits—both drastically inflated by the Donald’s stimmy measures including most of the contents of the Biden American Rescue Plan—-soared to a combined total of $5.9 trillion. As it happens, that’s equal to the total public debt incurred on the watch of 43 Presidents over the first 212 years of the Republic!

Needless to say, the Trump borrowing spree fostered serious distortions on the main street economy. The silly, erroneous idea that consumer spending (PCE) causes sustainable economic growth, in fact, got a huge kick in the pants.

Current PCE (personal consumption expenditures) was first artificially bloated by all the Trump stimmies, including the unpaid for tax cuts; and was then further fueled by an unprecedented build-up of household cash (see below). The latter continues to thwart the Fed’s belated attempt to bring inflation to heel up to this very day.