ManyU.S. residents and other people from various parts of the world arestill trying to come to terms with the recent election of DonaldTrump as the president of the United States. It is a fact that veryfew people expected Trump to win the elections, not because of lackof competence, but due to his campaign policies, some of which seemedincredible. The president-elect raised controversies when he saidthat the hullabaloo surrounding global warming is unjustified thatthere is nothing such as global warming. That notwithstanding, somepeople are beginning to view the Trump administration as the solutionto the economic challenges that have faced the people of America fora long time. An article that appeared in The Economist last monthoutlines the ways in which Trump’s government is anticipated tohelp ease the effects of the economic crisis that occurred aroundeight years ago.
Thearticle, which is titled ‘Trumponomics: King of Debt’ evaluatesthe argument that President Trump will fuel economic growth throughthe tax cuts that he promised to implement during his campaigns. Thearticle also reiterates Trump’s pledge to increase infrastructurespending as well as the amount of money allocated to the defensedepartment. If these promises are fulfilled, it is hoped that theU.S. economy will improve by a substantial margin. Clearly, thepromises made by President Trump, as outlined in the article, areconsistent with the topic of fiscal policy, which generally relatesto issues of collecting as well as spending money (Gopal 98).
However,the article illustrates that monetary policy and fiscal policyusually work in the opposite direction. More precisely, even thoughthe article outlines the anticipated benefits of the fiscal policiesenvisioned by the Trump administration, it also presents the darkside to such policies. For example, the article contains thestatement that the Federal Reserve is worried about the loominginflation (The Economist, para 4). To be more precise, it is statedthat the Federal Reserve possesses the power to flatten the stimulusenvisioned by Trump by enacting tighter monetary policies. From thisstatement, it is evident that monetary policy and fiscal policyrarely go hand in hand.
Thearticle also touches on the issue of inflation, giving the impressionthat the expansionary fiscal policy that is anticipated to be put inplace once Trump assumes power will lead to inflation. Anotheroutcome of the expansionary fiscal policy that is likely to beembraced by the Trump government is a significant decline inemployment levels. Citing a similar policy that was adopted by formerU.S. President Ronald Reagan, The Economist postulates that anexpansionary fiscal policy would have adverse effects on blue-collarworkers. Again, this example confirms the lesson obtained fromprevious class readings that some macroeconomic measures generatenegative impacts on employment together with a country’s grossdomestic product.
Afterpresenting the strengths and weaknesses of expansionary fiscalpolicy, the article arrives at the conclusion that it is not certainwhether or not President Trump’s policies will succeed. Citing lackof support from the Federal Reserve as well as the Congress, staffsof The Economist argue that the expansionary policy envisioned by thePresident will face substantial obstacles. Nonetheless, the articleacknowledges the possibility of the policy succeeding, particularlyin consideration of the unpredicted manner in which Trump won theelections. Even so, the article clearly appears to be inclinedtowards the view that the expansionary policy will be a failure. Forthis reason, it is correct to say that the article seems to questionthe principles of Keynesian economics, which are based on the premisethat governments can manage business cycles via fiscal policy.
Accordingto the article, incoming U.S. President Donald Trump believes thatthe government alone is capable of fuelling economic growth in thecountry. This perception goes against the neoclassical economicsassumption that individuals are driven by rational expectations intheir pursuit of utility maximization. More specifically, thepresident and his supporters seem to ignore the fact that the peopleof America are independent, rational individuals who are capable ofmaking sound economic decisions basing on the information that theyacquire. Viewed from this perspective, the article may be interpretedas giving the impression that people are already aware of thedisadvantages of expansionary policies, as was witnessed duringReagan’s regime. Subsequently, the article also highlights theconflict that exists between Keynesian economists and theircounterparts who adhere to the neoclassical school of thought.
Inconclusion, the article published in The Economist provides a goodillustration of the main economics concepts, including economicthinking, macro workings, and economic policies. To be more precise,the article sheds light on the different economic theories as well asviews on how markets operate. By exploring these concepts through thelens of a current event that is being discussed not only in the U.S.but in all parts of the world, the article proves useful inunderstanding key economic concepts, terminologies, and principles.
Gopal,Rama C. Managementof financial services.Vikas Publishing House, 2014. Print.
“Trumponomics:King of Debt.” TheEconomist,Nov 26 2016. Web.