Donald Trump won by making promises. He said he could stop the flow of jobs as they move around the world. One way is to start trade wars. He said this would bring factories back to towns where they had closed. He says this could work even if the rest of the world was going global.
For example, companies all over the world are looking for the best way to make and sell their goods. They are using technology to drive decisions. Trump wants to take the U.S. out of this competition. He says having jobs at home in America is more important.
Trump also wants to rebuild America. That costs money. He wants to finance the rebuilding with tax cuts for the wealthy. He says this will end up in more jobs.
Experts are looking at his plans.
One said that Trump will favor American companies. This helps firms that cannot compete in the world market. It reduces global trading. It is protectionism. It never works in the long run.
Why doesn’t it work in the long run? Among other reasons, it raises prices. When prices go up, the cost of everything goes up. It is inflation. What does inflation do? It creates problems for consumers. It is an even bigger problem for the government.
To pay for all it does, the government has to raise more money. Since Trump believes in lower taxes, the government will have no choice but to borrow money. That creates more debt. Government debt is like the mortgage on your house. You do not expect to pay it off in one year. But you do not want it to get bigger each year.
The goal is, at the least, to be able to make your monthly payment.
Part of your payment is the interest. It is what you pay to the lender. That is why he lends you money. Inflation leads to higher interest. So the government, like you, has to borrow more and pay more for the money it borrows.
One expert says that Trump may be the cause of many problems. It is his style. That is because investors like stability. Markets they can plan for. The worst outcome is inflation and higher interest rates. That could cause economic problems all over the world.
Source: The New York Times February 6, 2017