Randall Forsyth of Barron’s explores the president’s agreement with Democrats to delay the next fight over the federal debt ceiling.
However it came about, Trump apparently saw this as a good way to prevent inside-the-Beltway politics from obstructing efforts to help victims of Hurricane Harvey, against the backdrop of nonstop coverage of Hurricane Irma heading to Florida. If it meant leaving the GOP congressional leaders, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell out of it, well, there was little love to be lost anyway.
There is no argument about the humanitarian aspect of providing relief to areas in Texas battered by Harvey and those in Florida in Irma’s sights, as of this writing. From an economic standpoint, the implications also are clear: Fiscal discipline is kaput, and the budget deficit is headed higher.
That’s the message from veteran Washington watcher Greg Valliere, the chief strategist of Horizon Investments. The price of cooperation between the president and Democrats will be a surge of new spending. And Trump, the self-proclaimed King of Debt, won’t have a problem with that, given the slide in yields to close to 2% on the 10-year Treasury, which shows that deficits don’t matter.
Trump “believes that tax cuts and infrastructure spending that lose money are acceptable if they stimulate economic growth,” Valliere writes in a note to clients. “That attitude places Trump in alignment with most Democrats, who agree with the Steve Bannon view that forgotten Americans in places like Youngstown, Ohio, need not just jobs, but jobs that pay well.”
Congressional Republicans may be horrified, especially if the debt ceiling—the cudgel that fiscal hawks have tried to wield to curb spending—is eliminated, as Trump hinted to Schumer and Pelosi. This “bizarre marriage of convenience” could provide a “pork-filled tax cut, with something for everyone,” he continues, except those who care about the budget.
