Peter Schiff: Trump’s Tax Cuts Aren’t Enough

On Friday’s episode of the Peter Schiff Show, Peter discusses rising bond yields, government debt, and the economic implications of recent fiscal policies. He critiques the proposed “Department of Government Efficiency,” a recent  proposal for the government to load up on Bitcoin, and President-elect Trump’s economic rhetoric. Peter also argues that, despite the Fed’s failure to properly wield its independence, it’s still better than a central bank under the control of Congress or the President.

 

 

Another week of data reveals that the Fed’s recent rate cuts have failed to bring down long-term interest rates:

The yield on the 10-year US Treasury closed at 4.44, the highest since Trump was elected. Thirty-year yields, rarely discussed, are at 4.62. So now we’re closer to 5% than 4%. … This is the opposite of what the Fed had hoped. The purpose of the rate cuts was to bring down longer term rates too. They wanted relief to the housing market. They wanted to make buying homes cheaper.

Addressing Wyoming Senator Cynthia Lummis’s bill to establish a national Bitcoin reserve, Peter points out this would allow Bitcoiners to offload their crypto onto the taxpayer:

But what would happen as the U.S. government was buying Bitcoin, and selling gold? The Bitcoiners, especially the whales, would be selling the government their Bitcoin and then buying the gold from the government that the government was selling. They would be doing the opposite trade. They would be ringing the cash register with a big smile on their face knowing that they were sticking the taxpayer with this hot potato.

Pivoting to recent hype around President-elect Trump’s economic plans, Peter points out any growth induced by tax cuts are currently being canceled out by higher interest rates:

People who think we can have all this growth because the tax cuts are going to boost the economy are overlooking the impact of rising interest rates that are going to be exerting an opposite force on the same economy. So we’re not going to get all this economic strength just because Americans spend more money. We spend plenty of borrowed money as it is.

It would be great if the “Department of Government Efficiency” cleaned house in the federal bureaucracy, but existing union contracts make that very unlikely:

If you eliminate their agency, I don’t think they have to find another job for them. I think if their position is gone… but you can’t just cut the job and say,  ‘Hey, you’re a waste. We’re trying to streamline this.’ That’s the whole point of these government jobs. They come with job security. You can’t be fired when you get a government job. I mean, I don’t like it, but that’s the reality of these union contracts.

Peter is a longtime critic of Jerome Powell’s failure to exercise his political independence and criticize excessive spending, but even a timid Fed is better than putting the money printer in the hands of the president:

It is better to have some independence, even if it’s just a veneer, right? Could you imagine what Donald Trump would have done if he had his hand on the printing press during his first term when he was beating up on Powell, demanding rate cuts, more QE, and negative interest rates? At least he didn’t get it, but obviously, had he been able to do that, it may have been a lot worse.

Trump will cement himself as a great president as long as he shrinks the deficit and federal spending. If he fails to do this, he’ll keep the nation on it’s debt-paved road to fiscal disaster:

I know what the economy really needs. It doesn’t need another sugar high—that’s not going to work. The economy is so screwed up because we’ve had too much government stimulus. We don’t need more; we need to reverse the policies that made us this sick, not double down on them. …  It continued to get worse under Biden. What I’m afraid of now is who might follow Trump, because it could be someone far to the left of anyone we’re currently talking about.

For more analysis of last week’s events, listen to JD and Joel on Friday’s episode of the SchiffGold Gold Wrap Podcast.