Economics and the Cold Civil War
“You’re not supposed to say the word ‘cancer’ in a song.
And tellin’ folks Jesus is the answer, might rub ‘em wrong.
It ain’t hip to sing about tractors, trucks, little towns and mama,
Yeah that might be true.
But this is country music…and we do.
Are you haunted by the echo of your mother on the phone,
Cryin’ as she tells you that your brother is not coming home.
And if there’s anyone that still has pride in the memory of those who died
Defending, the old red white and blue.
This is country music…and we do.
So turn it on, turn it up, and sing along.
This is real. This is your life, in a song.
Just like a road that takes you home.
Yeah this is right where you belong.
This is country music.
This is country music.”
Bill Clinton beat George H.W. Bush for president in 1992 in no small part because of his campaign’s focus on “it’s the economy, stupid.” There were many other issues, as there always are. But the country was in recession and Clinton was able to lay the fault for that firmly at the feet of the incumbent president. It is hard for the party in power to win elections if the economy is in bad shape. There are many examples of this.
Therefore, one of the main priorities for Republicans to keep both Houses of Congress in the mid-term elections in 13 months, is to not be in a bad economy.
The civil war in which we are currently engaged for the soul and the future of America has many other battlefields other than the economy. But, if the economy goes south, we could lose all the others like immigration and crime and national security and our American culture.
This is well understood by the current administration. In this missive, I will lay out what I think the administration is trying to achieve and how they are going about it. Now, I have never met Secretary Bessent and it’s not like he’s called me up to tell me the plan. But, I read a lot of what he and others in the White House say and I have been around this block a few times in Washington. So, I think I’m at least pretty close.
By the way, don’t assume that I agree with all these moves. But my agreement is irrelevant. The stakes of winning or losing this war with the Marxist/Socialist/Islamic left are too great. I am willing to cut the president all kinds of slack on many things if he gets the ball over the goal line.
There are four economic goals they have in mind:
No Recession. Keep the economy growing.
Keep inflation low.
Reduce the deficit as a percentage of GDP so that there is no debt crisis that pops up.
Have Trump’s main constituency, the everyday working man and woman, feel like they are starting to get ahead.
Let’s take each one of those and look at how they plan to achieve them.
No Recession: The “One Big Beautiful Bill” was certainly part of the plan here. Prevent across the board tax increases, cut taxes for working families and give incentives for businesses to invest. Trump’s push for lower short-term interest rates, which he will be able to push through the Federal Reserve by the middle of next year if not sooner, is another part of the economic growth strategy. Lower shot term interest rates will help borrowers of car loans and personal loans as well as small businesses and commercial real estate owners who often borrow for terms of 5 years or less. Savers, however, particularly seniors who are risk averse, will see their incomes go down, which will cut the other way.
The economy is currently growing at about a 3% annual pace. Many forecasters believe a recession is overdue. Although there is some evidence that maybe a very mild one happened under Biden and the government and media fudged the numbers to cover it up. Either way, the plan here is to keep that economy growing at some positive pace through at least the next election.
Inflation: The most recent bout of inflation was largely caused by all the money printing during the pandemic. Quietly, the government is now withdrawing liquidity from markets, albeit quite slowly, in order to prevent this from happening again. The other major factor in inflation is energy costs. Literally everything in society (including how you are reading this missive right now) requires energy to get to you and/or operate. When energy costs go up, as caused by the “green new deal” , the price of everything must rise. Trump’s “drill baby drill” strategy is intended to keep those energy costs under control and thereby eliminate that contribution to inflation.
Finally, illegal immigrants have to live somewhere. When millions of them are deported or voluntarily leave, rents go down. This is already happening and will be reflected in the CPI index in coming months.
Inflation is currently running around 3%. As I will explain below, I don’t believe the administration wants it too far below that. But they certainly don’t want it to rise and have implemented the above to try to prevent that.
Deficit: Trump inherited a massive deficit and growing debt. In his private life, Trump is a “debt guy” and generally has no problem with borrowing lots of money. But the deficits are so high as to risk a “debt crisis” where the government could not find buyers for it’s debt and the economic consequences would be severely negative. So, the deficits, as a percentage of GDP, need to come down. The debt will still grow, but it needs to grow more slowly so the markets can absorb it.
Demographically, Social Security and Medicare expenses are going to increase. Defense spending will likely increase as well in an unsafe world. Some other areas of government spending will decline. But, that is not where the main part of the plan lies.
The first part of the plan is to increase the denominator in that percentage equation by making sure that GDP continues to rise with economic growth. See “no recession” paragraph above. This also will increase tax revenues from increased business and personal earnings.
The second part is to reduce the deficit further through tariffs and lower short term interest rates. Tariffs are a tax. No question about it. The question is who pays the tax? The conclusion of the markets and formerly mainstream media was that American consumers would pay it and it would be inflationary. Neither has turned out to be true. Retailers, importers and corporations have been eating much of the tax. And in a number of celebrated instances, some corporations (Toyota and Ferrari for example) have chosen to increase prices around the world to spread the tariff costs out. So effectively, consumers in India and elsewhere are paying the tax. This is a big win. Reduce the deficit by having foreigners pay more tax.
And then obviously, if short term interest rates go down, that will reduce the interest costs to the federal government which in turn lowers the deficit.
The third part is to make sure there are buyers for the still increasing debt. New Stable Coin issuers are required to back their stable coins with Treasury Bills. And there are other requirements for banks and insurance companies and others that will create price insensitive buyers for Treasury debt instruments.
That price insensitive point is important. If inflation hangs at 3% (which I actually believe the administration would be fine with to inflate away the debt a little) and the 30 day Treasury Bill rate is 2.75%, then you will actually go backwards on a real basis owning Treasuries. But, if enough institutions and foreigners have to buy them, then they will be bought. Again, this is in effect a tax on the holder of Treasury Bills, paid for by those who hold them.
Working Families: Last but absolutely not least comes the plan to have the average working family start getting ahead again. By expelling millions of illegal aliens, the available workforce declines, which should have the affect of raising wages. Add to this the “on-shoring” of more production because of tariffs and other incentives, and the person who works with tools should see an increase in wages above that of inflation.
Additionally, the “no tax on tips and overtime” policies are specifically designed to increase the take-home pay of those workers. And since these tax benefits phase out at six figure incomes, all of the benefit will accrue to moderate income families. You will never read that in the NY or LA Times.
Finally, income inequality (which is worst in blue states) increased dramatically under Biden as people with assets (stocks, gold, real estate, collectibles, bitcoin) saw those assets increase in value while those without meaningful assets gained nothing. All of the above policies are likely to result in asset prices not increasing as much they have in the recent past, making it possible for new people to buy houses or save some money to invest.
And there you have it. Will it work? Time will tell. The leftist cabal is desperately hoping it fails and the country is bankrupt and people are miserable so they will accept socialism as an answer. Socialism, of course, has been proven time and time again to increase misery and solve nothing. But the concept of it is alluring to those who are not intelligent and who lack independent thought but have been indoctrinated by America’s Universities. However, the Trump economic team is hard-working, tireless and smart. I would bet on them to succeed.
It is always the economy, stupid.
One quick word on the government shutdown: I went through a bunch of them. A “clean CR” was always the solution to the shutdown not the cause of it. A clean CR means Dems don’t get to increase spending but R’s don’t get to cut it. But the Trump Derangement Syndrome on the part of Dems is so bad as is their new fealty to the socialist/Marxist/Islamic left, that they can’t accept what has always been the acceptable middle ground. A shutdown gives enormous power to the president to shut down what he wants and keep open what he wants. Obama shut down things Republicans cared about (parks, military, etc.). Trump will shutdown things Dems care about (EPA, Dept. of Ed and bureaucracy). This is a dumb lose/lose move on the part of Democrats. Their only hope is that people see this as chaos and blame the party in charge. I doubt that happens. I predict Dems will cave as government workers scream.
This week’s song has nothing to do with economics. It is an ode to how country music stands for truth and what is right in the face of a culture that rejects those things. It speaks to the courage necessary to do that. That is what we all must do. We must have the courage in this time of civil war to articulate what we believe in and why without concern for who might be offended.
I say again, we are all Charlie Kirk.
I remain respectfully,
Congressman John Campbell
Drive Fast & Live Free
Follow me on X and listen to me on the nationally syndicated The Hugh Hewitt Show: