On Economic Policy, The White House Is Its Own Worst Enemy

The path of US politics over the past 10 years is scarcely believable — and keeps getting weirder. A miraculously successful amateur politician, now half a year into his second term in the White House, isn’t content to take his wins and count his achievements. Instead, he seems eager to bring the ceiling down on his own head. Meantime, his career-politician opponents aren’t just failing to hold him to account, they are doing what they can to shield him from falling debris.

Forgive the median voter for being disgusted, bewildered or both. If systemic political failure is possible, this must surely be what it looks like.

Consider a recent poll in the Wall Street Journal. On issue after issue they care most about, voters say they trust Republicans more than Democrats — yet, at the same time, they disapprove of the way the administration is managing them. Voters prefer Republicans to Democrats on the economy, inflation, immigration, tariffs, foreign policy and Ukraine.

Yet on each of those topics, there’s net disapproval of the president’s initiatives. In particular, “51% say the change he is bringing is a form of chaos and dysfunction that will hurt the country. By contrast, 45% agree with the alternative statement that he is making needed and helpful changes.”

The implication for both political parties might seem clear. The White House needs to calm down and choose consolidation, not further controversy and “chaos.” And the Democratic Party needs to dump not just downplayits plainly unpopular positions and concentrate on projecting competence and moderation. They’re both doing just the opposite.

If I were a conspiracy theorist, I could suspect each party of planting agents in the other, secretly dedicated to guiding the enemy to defeat. I’d be deeply impressed by the skill of these covert operatives, instead of stunned by the parade of willful political dysfunction.

To be fair, in wrenching itself in a new direction, the Democratic Party has structural problems: zero leadership and activists who’d rather lose than compromise. That’s challenging. The Republicans’ dysfunction is more puzzling. They have a leader, to put it mildly, and he delights in winning above all. Yet Trump is willing to put his record of seemingly impossible political wins at risk for little or no return.

On immigration, clear majorities agree that the border should be secure, there’s a difference between legal and illegal immigration, and some of the millions of people who came to the US illegally (especially those guilty of other offenses) should be sent home. Merely by committing itself to this, the administration defeated the Democrats.

But clear majorities don’t support rounding up any and all such violators regardless of their circumstances, without regard for due process, and using a hurriedly expanded force of masked enforcement officers and opaque network of makeshift, ostentatiously punitive detention centers. Resorting to such methods seems a good way for the administration to lose an argument that it had won.

The same goes for economic policy. As it intended, the White House has successfully dismantled the post-war trading system and moved the US into a new regime of discriminatory tariffs and managed trade. The recent Big Beautiful tax-and-spending bill abandoned all pretense of fiscal prudence and accelerated the trajectory of unsustainable public debt. Yet despite warnings of inevitable disaster, the S&P 500 continues to set records, seeming to validate Trump’s thinking. So far, at least, another big political win.

The political threat to this new economic regime isn’t its long-term consequences — which in any case are uncertain. Large forces are in contention. Will the push to growth and productivity from AI-driven innovation, less regulation and generous tax relief for investment overpower the pull of tariff-driven stagflation, ill-conceived industrial policy and the crowding out of investment due to excessive government borrowing? Hard to say. But the debate about those questions will last well beyond the current administration. The politically salient threat to Trump’s economic policies is short-term disruption in financial markets — the risk that Wall Street will stop applauding Trump, turn against him and drive the economy into a recession.

As with immigration, the conduct of economic policy might have been calculated to sabotage the whole enterprise. Name three things capable of provoking a financial-market veto while delivering no offsetting benefit. How about stoking endless uncertainty over future tariffs, kneecapping the Federal Reserve’s operational independence and undermining trust in official statistics? Done, done and done.

Trump has escalated his unwarranted attacks on Fed Chair Jerome Powell (whom he appointed back in 2018), going as far as to drum up accusations of impropriety over the central bank’s renovation of its headquarters. Last week he appointed Stephen Miran, a key thinker behind Trumpist heterodoxy, to a temporary position on the Fed’s board, while the search for a suitably compliant successor to Powell proceeds.

Doesn’t it serve Trump’s purposes to install a servant at the Fed? No, it doesn’t. For a start, the idea that the Fed is scheming to defeat Trump’s broader policy agenda is preposterous. Even if an obedient Fed were to deliver the much lower policy-rate that the president thinks appropriate, this wouldn’t necessarily lower the interest rates he cares about — mortgage rates, cost of credit and long-term borrowing. It’s much more likely that ending the Fed’s perceived independence (to say nothing of a big cut in the policy rate with inflation still above target) would push market-driven rates higher. Politically, attacking the Fed is all risk and no return.

Installing a follower at the Fed looks almost reasonable compared to firing the head of the Bureau of Labor Statistics on patently specious grounds. The president accused Erika McEntarfer of rigging the July jobs figures released on Aug. 1, because they included unusually big downward revisions for May and June.

It’s hard to see how McEntarfer could have rigged the numbers even if she’d wanted to. Revisions happen, and they’re apt to be bigger when sectoral demands for labor are shifting a lot (as they are now, thanks to tariffs and the crackdown on illegal workers) and when the agency is short of the resources it needs to gather data (as it is, thanks to the drive to cut government workers). For sure, the agency needs to improve its methods and keep the revisions as small as possible — goals made harder by the administration’s dismantling of the panel of unpaid technical experts responsible for doing so.

To repeat, I’m fairly sure a Democrat saboteur hasn’t tunneled into the White House — but the true explanation evades me. As with attacking the Fed, firing the head of the BLS to install a follower whose independence will be questioned is all risk and no return. Planting the suspicion that employment and inflation numbers might be manipulated would add a further premium to long-term interest rates. And as such doubts accumulate, so does the risk of a “Trump moment” for financial markets — with no short-term political benefit, beyond dominating the headlines, in exchange.

On immigration, trade, the Fed and the integrity of official data, the White House seems determined to cast aside its successes and take risks that serve no purpose. To be sure, for as long as financial markets allow, the president will probably keep on winning — you know, because the Democrats. How such a great country wound up with such politicians, I cannot fathom. Look on their works, median voters, and despair.