Trump’s Economic Policies: Broader, Deeper Consequences

In 1925, Winston Churchill, the then British treasury secretary, made a questionable decision to reinstate the pre-WWI value of the pound sterling, puzzling economist John Maynard Keynes. A similar perplexity arises today when reflecting on former President Donald Trump’s actions surrounding the Bureau of Labor Statistics’ job statistics. Churchill’s impulsive decision drove up the cost of Britain’s exports, leading to unemployment and pushing the country into an ahead-of-time depression. Trump’s decisions might not show such immediate effects, but the lasting impact could be broader, deeper, and potentially irreversible.

Intriguingly, the lack of understanding or concern about these monumental decisions from voters, and notably the members of the Republican party, is worrisome. It becomes more irksome to realize that Trump’s impulsive behavior ends up sabotaging his own desired outcomes. Uncertainty looms large due to the contradictions of Trump’s wants: he advocates for lower interest rates, particularly on crucial ones like mortgages, while also insisting on a thriving economy with high employment and output.

The monetary policy is set by central banks, such as our Federal Reserve. They lower rates if the economy slows down with declining output and employment, and raise them in a booming economy with high employment and increasing output. This essentially means Trump’s wish to have both lower interest rates and a booming economy simultaneously is oxymoronic. The Federal Reserve may set targets for interest rates, but changes in them require alterations in the money supply, with the most significant and immediate impacts being felt in short-term interest rates rather than mortgages.

Long-term interest rates, such as those for home mortgages or U.S. government debt maturing in 10 years or beyond, are heavily influenced by the expectations of financial markets about the future, not just by the Fed’s current monetary jockeying. Extreme uncertainty about the economic climate, alongside an inflationary money supply, can push up long-term rates even amidst a lowering of the Fed’s short-term target.

Financial markets, families, and businesses rely heavily on trusted economic indicators like employment statistics. Hence, when these figures are falsely claimed to be manipulated for political gain, as Trump has done, it instills great uncertainty. This uncertainty can devalue assets like stocks, bonds, and retirement funds, raise interest rates, diminish the appeal of the dollar as a safe reserve for foreign investors, and cause the U.S. dollar to decline relative to other currencies.

Trump’s unchecked vocalizations end up reciprocating more harm than good to him and, unfortunately, most American families and businesses. The Bureau of Labor Statistics compiles several indicators monthly, with the ‘household survey’ and ‘establishment survey’ focusing on fundamental labor metrics. The information provided by these surveys and their impact on the economy are profound.

Consider the extent of the harm Trump’s audacious claims can cause. Economic information broadly serves as a ‘public good’; it benefits everyone beyond the entity that generated it. Its value doesn’t reduce when more people benefit from it (non-rival), and it can’t be easily withheld from others once produced (non-excludable). This unique property necessitates that governments produce it optimally for economic efficiency because free markets alone might not provide sufficient incentives.

Businesses, local governments, farmers, and other key economic actors rely heavily on this federally produced data for decision-making. Agricultural players depend on statistics from the USDA about plantings, grain stocks, exports, and other data including information from other nations. The same goes for other industries like transportation and export elevators.

Yet, as Trump alongside his supporters, such as Kevin Hassett and various Republican Congress members, continue to propagate these falsehoods, they’re backing themselves into a corner. Those who rely on accurate data know there’s no manipulation by the BLS; however, their constant denial fuels pressure on any loyal follower who leads BLS to do what Trump accuses shouldn’t be done: actual data manipulation for political gain.

In this mess, the irony is that the accusations of manipulating trustworthy figures lead to a situation where everyone believes the figures are manipulated. This suspicion spirals into questions about the validity of any future revisions. Among the many dedicated BLS employees, it seems unlikely that no one would expose any sinister actions of a puppet undermined by Trump.

Such political revisions would not only cast a shadow over the employment figures, but also erode confidence in other data series. Contemplating the uncertainty surrounding upcoming reports such as the World Agricultural Supply and Demand Estimate heightens the anxiety. Various players, from farmers and grain shippers to input suppliers around the globe, rely on the accuracy of such reports for decision-making. Compromised trust could render these entities riskier and less efficient, leading to higher food costs for consumers.

The potential contamination of faith doesn’t end here. The ripple extends to all indicators, including oil and gas data. This week, as the Consumer and Producer Price Indexes for July are disclosed, their genuineness will be under scrutiny. In fact, with a new BLS commissioner in position, the faith in these indicators come August will surely be questioned.

A substantial number, around 70 million Social Security beneficiaries and an additional 8 million SSI recipients, will have their cost-of-living adjustment for 2026 based on consumer prices for July, August, and September. If the new BLS director is perceived as echoing the demands of a president who insists on painted rosy numbers, can nearly 80 million people trust the proposed figures?

It’s unnerving to think that, as a result of these outbursts, millions of Americans might believe that due to Trump’s policies and tariffs, their living expenses for the upcoming year will rise. Trump appears oblivious to the fact that his actions this week could result in increased interest rates and borrowing costs for families, companies, and the government. This in turn could devalue physical and financial assets, further depreciate the dollar, and generally worsen conditions for the nation; a troublesome scenario, regretfully, for him as well.

With all these factors considered, significant outcomes might not always be dramatic or immediate. They occur incrementally and often slowly. The events transpired this week embody this, reflecting how long-term consequences of wrong decisions can subtly diffuse and evolve over time, sadly at the expense of the nation.