And if you’re fair, you admit that some of Trump’s policies are helping the economy and some are hurting the economy. …
… Simply stated, I like what Trump is doing on taxes and regulation, but I’m not a fan of what he’s doing on spending and trade.
Because he’s all over the map, it’s not easy to assign an overall grade to Trump’s economic policy (especially since it’s an open question whether Trump is trying to liberalize trade or restrict it).
Regardless, this discussion got me thinking of how best to explain the importance of various economic policies. …
… I sometimes use a simple analogy in speeches, equating economic policy with the soundness of a house.
- The quality of governance is akin to the foundation, because just as a very nice house won’t last long if built on a shaky foundation, good policies won’t generate much prosperity if the legal system is corrupt and property rights aren’t protected.
- Monetary policy is akin to the framework of the house because it is also systemically important. Most recessions (and the false booms that precede downturns) are caused by misguided central bank tinkering.
- Finally, … trade policy, regulatory policy, and fiscal policy are the floors of the house. They determine the livability of the house, whereas monetary policy and quality of governance determine the structural soundness of the house.