Peter Navarro: Until The Bond Market Starts Caring, Trump Can Balloon The Deficit

Peter Navarro: Until The Bond Market Starts Caring, Trump Can Balloon The Deficit

Frankly, I’m not sure why we’re spending any time on this, but just as passersby can’t resist the temptation to gawk at a horrific car accident as they drive by on the highway, readers have, over the last two years, demonstrated a somewhat masochistic propensity to care what Peter Navarro says when his vampire-like visage materializes on television.

Saturday’s theatrics came courtesy of an interview with Michael Smerconish, who asked Peter to explain how it is that the Trump administration’s fiscal profligacy is in any way consistent with traditional GOP orthodoxy.

“I was born, Peter, of an age, when the Republican party was the party of fiscal prudence”, Smerconish said.


As you can see from that painful clip, Navarro blamed Democrats. “Sure, well, elections do have consequences, Michael, and we had to negotiate with a Democratic House”, he began.

He should have been stopped right there. Although it’s true that the Trump tax cuts are not the sole contributor to the worsening of America’s already precarious fiscal trajectory, they are a big part of the problem. And yes, America was already on a worrying fiscal path when Trump took office, but the fact is, he promised to fix it (on too many occasions to count and in the most explicit terms imaginable). Instead he’s made it worse. Much worse. And needlessly so given where the unemployment rate is:

That’s everywhere and always what people are asking when they quiz administration officials about the deficit, and the whole thing is made immeasurably more ironic by the fact that Mick Mulvaney is involved. Mick was, after all, one of the most notoriously belligerent fiscal hawks in Washington prior to coming under Trump’s wing.

“It sounds like you’re laying it off on the Ds even though it’s that tax cut, right?”, Smerconish attempted. “No, I think… here’s the thing… if we want to balance the budget, the best way to do that is to grow at 3% or 3.5%”, Peter responded.

Ultimately, Navarro got around to faulting the Fed: “In 2019 if the Federal Reserve hadn’t raised rates too far, too fast and lowered them too slowly, we probably would have had another point of growth”.

Probably. Or maybe not. Navarro says that as though it’s a foregone conclusion, but if you look at the lack of business investment (which is what’s serving as a drag right now even as consumers continue to… well, to consume), the proximate cause of C-suite uncertainty is, was, and will continue to be, trade policy.

It’s true that election jitters are front and center in 2020, but CEO and CFO confidence have been declining for quite a while. Navarro’s trade war with China is a big reason why.

(Deutsche Bank)

Peter did get one thing right, though. “I think until the bond market starts worrying about the deficit, everything will be just fine”, he told Smerconish.

Everyone is an MMT proponent these days – even those who don’t realize it.


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