Connect with us

Economics

America really could enter a golden age

Published

on

Maybe you are in the habit of applying a hefty discount to claims by Donald Trump; no one could blame you. But he really does have the chance to lead America into the golden age he proclaimed in his second inaugural address. Historic circumstances, political dynamics and his own audacity could also enable him to achieve the legacy he wants as “a peacemaker and a unifier”. His party has fallen into lockstep; his adversaries at home are confounded and enervated, and America’s opponents abroad are preoccupied with their own troubles. Mr Trump has battled for ten years against anyone he perceived to have crossed him. His most formidable adversary still standing is probably himself.

As he assumes office again, Mr Trump has embarked on a marketing offensive, a familiar routine, albeit this time with a twist: rather than having to persuade people something is grander than it is—that the Trump Tower in Manhattan has 68 floors rather than 58—he has to assign himself credit for things that are truthfully better than Americans may yet realise. America’s economy is the envy of the world. America is already exporting record amounts of gas and oil, and its biggest obstacle to pumping more is global demand. But Mr Trump’s declaration in his inaugural address of a “national energy emergency” may help him vault to the head of the kind of parade celebrating American glory that poor President Joe Biden lacked the wherewithal to summon.

Similar gamesmanship explains Mr Trump’s inaugural commitment that Americans would now “be able to buy the car of your choice”, which was equally true under Mr Biden (and equally untrue for those who chose a Ferrari but could not afford one), and his pledge to use troops to “repel the disastrous invasion of our country” at the southern border, where arrests for illegal crossings are below the level when Mr Trump left office.

Yet Mr Trump’s initial executive orders are meant to do more than gild the lily. In some cases they call for drastic action, particularly on immigration. As with Mr Trump’s promises of tariffs and his exhumation of “manifest destiny”, no one knows how far he may go with his deportation initiative. But there is also a bigger, more hopeful possibility: Could his showy crackdown be part of a grand plan for the golden age?

In Mr Trump’s first term some of his aides saw the potential of linking enhanced border security to broader reform of America’s immigration system. For all his harsh oratory about immigrants, Mr Trump has sometimes sounded sympathetic, particularly about people brought as children. Last October, he told the editorial board of the Wall Street Journal he had a practical reason for his tough talk about illegal immigration: “The nicer I become, the more people that come over illegally.” (The Biden administration learned that lesson to its sorrow.) But, Mr Trump said, “We have a lot of good people in this country, and we have to do something about it.” In general, said Mr Trump, who is married to an immigrant, and not for the first time, “I want a lot of people to come in, but I want them to come in legally.”

Mr Trump tries to win over any room he walks into, and that may explain his comments to the Journal editors. But he may also recognise that he has amassed more credibility with immigration hardliners than any president in memory, and thus has an opening to achieve what his recent predecessors could not. Comprehensive immigration reform has eluded presidents since 1986, when Ronald Reagan signed into law heightened border security along with amnesty for almost 3m people in America illegally.

Other grand, bipartisan bargains are possible for Mr Trump. He has not displayed interest in the kind of far-reaching tax reform that Reagan achieved, but in his first term he showed a flash of ambition for the sort of gun-safety legislation that polls show a majority of Americans want. “It’s not going to be talk like it has been in the past,” he told grieving parents and students after a 19-year-old gunman killed 17 people at a Florida high school in 2018. “It’s been going on too long, too many instances, and we’re going to get it done.” He scolded Republican lawmakers for being “scared” of the National Rifle Association (but then, after talking to NRA officials himself, backed off).

Such deals at home would realise Mr Trump’s vision of being a unifier. His opportunities to prove himself a peacemaker, extending America’s golden aura beyond its shores, await not in Panama but in Eastern Europe and the Middle East, where war may have wearied America’s allies but has surely weakened its adversaries, Russia and Iran. The test for Mr Trump is whether he can insist on fair deals for Ukraine, and for the Palestinians.

With malice toward some

From Abraham Lincoln to Franklin Roosevelt to Reagan, presidents who accomplished great things appear more as unifiers in the eyes of history than they did in those of their contemporaries. They were all dividers, too. They were also subjected to vicious criticism and even violent attack.

But Mr Trump has yet even to hint at the grandeur of spirit that those presidents brought to the job. The petty partisanship of his inaugural address, along with his pardons of even violent January 6th convicts, bode poorly for the chances he will ever overcome the weaknesses likely to cast a shadow over what could be a golden age: self-pity, a flickering attention span, a vulnerability to flattery and a reverence for strongmen. “Trump’s sense of aggrievement reinforced his penchant for seeking affirmation from his most loyal supporters rather than broadening his base of support,” General H.R. McMaster concludes in “At War With Ourselves”, his memoir about his time as Mr Trump’s national security adviser during the first term. “Trump’s indiscipline made him the antagonist in his own story.” And in America’s.

Economics

Germany’s election will usher in new leadership — but might not change its economy

Published

on

Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

Germany is 'lacking ambition,' investor says

Continue Reading

Economics

DOGE attacks a bastion of Republican internationalism

Published

on

Elon Musk has joined a war of ideas under the guise of a budget fight

Continue Reading

Economics

In Texas, vaccine-choice activists are ascendant

Published

on

Amid a measles outbreak they are lobbying for more “medical freedom”

Continue Reading

Trending