We Highlight The Differences in Economic Policy Between The Dems and GOP

Social agendas aside, there is not much difference between the Democrat and Republican parties as it relates to economic policy. We highlight several differences in economic policy between the Dems and GOP below.

Energy Policy: A Trump Administration will allow Oil producers to produce without penalty. Increased oil production will reduce the cost of oil per barrel and will also reduce the cost of derivative products including vehicle gasoline and food products. Expect lower costs at the pump and modest reductions in the cost of food under a Republican Administration. U.S. Energy Policy is the greatest economic differentiator between Republicans and Democrats. Cheaper energy is always a positive for American consumers. The losers here are the Democrat Party and the Private Equity firms (and their limited partners) that raised money to invest in “green” energy projects. What a boondoggle. The only “green” energy that is ready for prime time is nuclear energy.

Tariffs/Trade Policy: It is difficult to say what a Trump Administration may actually do as it relates to tariffs, as much of Trump’s tariff-related bluster is clearly his beginning public negotiations with China and Mexico. Who loses in a tariff war? Consumers. Consumers lose because they will have to pay higher prices for the goods and services they desire. Trump’s protectionist plan will result in certain companies (think of the Japanese, South Korean and Chinese auto OEMs), building manufacturing capability here in the U.S. The problem is that the U.S. lost most of its manufacturing knowledge base when President Clinton signed onto NAFTA and globalization ensued. Manufacturing jobs (and the inherent skill set) left the United States for less expensive geographies such as China and Southeast Asia. The United States can’t grow a manufacturing base overnight, this includes the chip sector. A longer-term solution toward the United States recapturing its manufacturing excellence is to teach these skills at the grade school level as Germany does with its automobile industry. We already see this to a degree as Google and others offer free courses around computer programming, artificial intelligence and more as these Tech platform companies work to qualify their future labor force.

National Defense: Trump has been vocal about not wanting to participate in forever wars. The challenge here will be that the large defense contractors own Congress on this issue, therefore Congress will always push for NATO expansion and perpetual wars. With the wind down of Afghanistan and its related revenue, the Defense contractors, Congress and Biden Administration have replaced that revenue with wars across the Middle East/Gaza and Russia/Ukraine. As to the latter, Victoria Nuland’s failed policies over the past 10-12 years cost her job at the State Department – another rotten institution that needs to be gutted – as Ukraine clearly never wanted war with Russia, were it not for Nuland’s insistence.

What does the Biden Administration hope to achieve in Russia? Kill Putin and install a friendly? It will never happen. The United States tried nation building in Afghanistan and it failed miserably. No country will successfully overthrow Russia. If the United States kills Putin, he will no doubt be replaced by a hardcore nationalist. Further, we don’t want war with Russia. Our DEI-infused military leadership is weak and untested, whereas Russia is in peak fighting form as a result of having fought the Ukraine war.

Thus, in 2025 D.C. will push for war while Trump will push for peace. Trump will need a strong, conservative, small government-oriented Secretary of Defense and Treasury Secretary to keep the U.S. out of war. I nominate Erik Prince for the former and Vivek Ramaswamy or Dave Smith for the latter. Call me if Vivek and Dave Smith say “No”.

Fiscal and Monetary Policy: I would be happy to play the role of “Dr. No” as Treasury Secretary or Fed Chair if either Administration has difficulty filling either post. Unfortunately, both the Democrats and Republicans wish to keep the spending machine rolling so that they may receive their kickbacks. The only difference with Congress today versus 30 years ago is that 30 years ago black bag diplomacy (kickbacks) were delivered in black bags, whereas today they are delivered via Bitcoin. Commentary aside, I do not see much if any difference between the Dems and the GOP as it relates to fiscal and monetary policy. I expect taxes to move higher under each party. I expect a $1.5-2.0 Trillion fiscal deficit in fiscal 2025 (fiscal year beginning October 2024). I expect the Fed Funds rate to move lower and for the yield curve to normalize. The long-end of the yield curve (7, 10, 20 and 30 year Treasury securities), will eventually move higher if elevated fiscal spending persists as Treasury investors will demand more than a 4% yield on the 10-year in order to be compensated for a weaker Dollar (as a result of deficit spending). A 6-8% yield on the 10-year Treasury will dramatically slow fiscal spending, which is exactly what the U.S. needs.

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