"Hang on to something solid for the next few months. The stock market last week might have been the canary in the coal mine. We are in for a wild, yet necessary, ride."
Whiplash. This term came to me yesterday. It explains quite a bit of what is happening in Washington. In previous posts, I have talked about how most administrations are the "ying" to the previous administrations "yang". Every previous administration tries to "bend the curve" from the prior administration(s). That is - until Donald Trump came around.
Trump is not "bending the curve" from the Obama, Bush or Clinton administrations. He is going to get some stuff done - and he is going to get some big stuff done in a big hurry. Is he going to change what Obama has done? Not only change it, but destroy most of it. He is a true iconoclast. The changes are going to come so fast, some of us might get "whiplash". But these are changes which MUST BE made.
First example. The Freedom Caucus in the House is having a fit right now over the size of the two year deal. Understandable - it is a budget busting number. BUT (and this is very important), the 2011 sequester, which was the worst idea in the history of man, left our military looking almost third world rather than like a super power. This current budget really needed to be "juiced" to get enough money to the military to get some things fixed. To get our readiness up to snuff. And (this is huge), to help ensure this budget was at least a little bit bipartisan, some Democrat "pet rock" programs also had to be over funded. Whiplash.
Next example. DACA. This issue has been going on now for just about forever. Again, to try and make this fix at least somewhat bi-partisan, President Trump offered to legalize 1.8 million dreamers. Wait! There are only 800,000 dreamers at last count! That is right. But the President wanted to lay out a number the Democrats could not turn down. In return, the President will get an end to chain migration, visa lottery and $25B to start funding the wall. No matter how carefully this is crafted, it will still look like amnesty to some. Whiplash.
Next example. Infrastructure. Today, the President is going unveil his long awaited infrastructure proposal. It is going to be massive - about $1.5T. Why so big? Because jack spit has been done in fixing and updating our infrastructure for decades. We need it. We are long overdue. The "shovel ready" boondoggle stimulus package that Obama visited upon our country, was not "shovel ready" at all. We did however, find out how fast a shrimp can go on a treadmill. Will this $1.5T add to our national debt? Absolutely. Whiplash.
The bottom line is this folks. We elected an outsider - a businessman to be our President for a reason. We wanted to get some needed and critical items done. And with very little help from establishment Republicans, Democrats and the so called media, he is doing just that. He and his economic team are betting on hitting an inside straight. Betting that the economy will heat up just enough, to give a constant 3.5 or 4 percent GDP. That type of growth in the economy will mitigate some of the growth in the national debt.
Are there dangers in all this whiplash? Sure, it the inside straight does not materialize and we get inflation due to an overheated economy, interest rates are going up. And if they go up, the cost of carrying a $22T national debt goes up. If that goes up too much, the economy tanks.
Hang on to something solid for the next few months. The stock market last week might have been the canary in the coal mine. We are in for a wild, yet necessary, ride.