Power & Market

Trump's SOTU: Guns and Butter for Everyone

Trump's SOTU: Guns and Butter for Everyone

The theater of the State of the Union Address is always the hardest part to stomach. The endless outbursts of applause, the parading up of guests with allegedly inspiring stories, and the calculated pauses all make me wish we could return to the days when Thomas Jefferson submitted his addresses to Congress in writing. 

Nevertheless, the SOTU speeches do often provide some good fodder for evaluating just how bad an administration's plans are for the next year. 

One characteristic of Trump's speech, however, is what appears to be an unusually high level of non-specificity. That is, Trump apparently has some big plans, but for the most part, he didn't provide any details as to how big. 

Once he got past a long list of guests and introductions, and past a few vague government statistics on job growth, Trump went into the best part of the speech, which was naming the good policies that the administration has so far supported: deregulation, tax cuts, non-activist federal judges, gun-ownership rights, and religious freedom.

To the extent that the administration has pushed policy in support of these items, these developments have been good. 

Once he moves beyond these issues, Trump begins to hit shakier ground. 

Trump quickly moves on to trade issues, including claims that it's best if automobiles and other goods are manufactured in the United States. 

Based on his earlier speeches, of course, one can only assume that Trump is pushing higher tariffs aimed at raising the prices of imports, and thus punishing consumers. He doesn't state it that way, of course — and he didn't state it that way tonight — but that has been Trump's stated policy. 

Tonight though, Trump remained sufficiently vague on these topics to make it difficult to determine just how committed he is to a protectionist trade policy. His rhetoric was significantly scaled back, and there was no mention of specific penalties or tariffs or efforts designed to punish companies considering moving out of the country. 

Moreover, when he mentioned how "unfair" trade deals with foreign countries are, he didn't actually offer any specific actions that would make them "fair." 

Thus, if we want to gauge his level of enthusiasm for such policies off tonight's speech, we don't have much to go on. 

Politically, of course, this is a good strategy. It means Trump's opponents can't do much in terms of condemning policy prescriptions. We just know that Trump wants "fair" trade, and that will sound good to a lot of voters. 

The economics behind Trump's trade policies are all terrible. It is not necessarily true that goods built within the borders of the US benefit Americans more than do low-cost imported goods. Only markets can work that out. 

But, politically, talking about new factories being opened in Alabama makes for great politics, and economists arguing against national policy designed to punish or reward certain industries won't win many friends. 

The worst part of Trump's talk, not surprisingly, was foreign policy. 

The foreign policy section was a long list of threatened interventions in foreign countries. Trump mostly ignored the many interventions the US is already involved in — possibly because those interventions provide him with little to brag about. 

A lack of a US invasion in Korea was seemingly defined down as a "concession" to the North Koreans, and the presence of the US's enormous nuclear arsenal was conveniently ignored when Trump attempted to portray North Korea as a real existential threat to the United States. 

Other possible interventions were lauded as well, including in Iran. 

These theatrics were coupled with alarming claims of the need to "rebuild the nuclear arsenal" — which is already enormous, and to "fully fund" the military — which is already funded above Cold War levels. 

We can clearly expect a lot more government spending on these issues in the future. 

But again, there were few specifics mentioned. 

One of the few specific numbers mentioned was the "at least $1.5 trillion for the new infrastructure investment that our country so desperately needs." 

Coupled with the military spending, this detail reminds us that this administration will be firmly committed to a guns-and-butter policy going forward. 

We can expect to see far more spending on everything from Medicare to the Pentagon to infrastructure. 

Not surprisingly, there was no mention of government deficits. 

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