Uncharted Waters: How President Trump Can Navigate Toward A More Resilient Economy
Authored by Daniel Lacalle and Jaime Figueras,
This week, financial markets have experienced unprecedented volatility.
Two key issues dominate the national conversation: first, the shifting economic landscape under President Trump’s leadership and second, the increasing financial burden faced by older Americans.
While market uncertainty looms, President Trump’s policies are aimed at fostering long-term stability and growth, both domestically and globally.
At the same time, we urgently need to address the mounting credit card debt among older Americans who are facing financial difficulties as they near retirement.
These two issues, while seemingly unrelated, share a common theme: the need for strategic planning, responsible policies, multi-horizon solutions that alleviate the immediate economic burden for older Americans as well as long-term solutions that galvanize the US economy for younger individuals.
The recession and stagflation risk was created by four years of insane government spending and record deficits in a growth economy, not by a month and a half of a new administration.
Milei in Argentina implemented decisive and drastic cuts and many predicted chaos. However, the economy strengthened, inflation declined, and poverty fell… In less than a year. Supply-side measures do not work immediately, but they work, and they last. Don’t expect miracles in a month.
Unfortunately, some market participants tend to get excited about central planning and scared of supply-side measures. Why? Because the first one means printing money and the other requires bottom-up deep research. However, betting on central planning always leads to disaster.
Increased government spending leads to the issuance of more currency units and an artificial increase in money velocity. Keynesian interventionists propose higher taxes to reduce the excess of money in the system. Therefore, government size in the economy rises in periods of expansion and rises as well in periods of slowdown, eroding the investment and saving capability of the economy. The road to stagnation. This leads to persistent inflation, lower real wages, and economic stagnation.
As such, a short recession resulting from the control of government spending and debt is not a negative event. It is simply the manifestation of a previous excess. Reducing taxes and cutting the excesses of past years in government jobs and expenditures will only make the GDP healthier.
In the past four years, federal debt growth has exceeded even nominal GDP growth, and by a significant margin. Curbing that path to ruin is an essential policy.
It is better to have a short and healthy recession if it comes from lower government spending and more attractive taxes than to maintain GDP growth with debt and unproductive expenditure.
A short recession can be positive. It is like the process of losing weight and exercising following a sugar and alcohol binge. The economy will be stronger by making the private sector more robust, and subsequent growth will be more productive and sustainable.
It is essential that the next Treasury secretary talk about the essential adjustments required by the economy and the reality of the time bomb inherited from the Biden administration. Bidenomics was an upside-down approach to economics, and the United States requires supply-side strategies to restore productivity, wealth, and genuine prosperity.
Reducing deficits and debt with higher taxes is an unacceptable option. On the one hand, there is no revenue measure that can eliminate the current $2 trillion deficit. However, tax receipts follow a cyclical pattern, while public spending is a yearly and consolidated process. Therefore, using taxes to reduce debt always fails.
Sound money and a responsible government budget, supported by lower taxes and reduced bureaucratic expenditures, are the only options to strengthen America’s economy. Socialism would be disastrous. Conservative Keynesianism would be useless. The U.S. must learn the lesson of the UK and the EU countries’ recent examples and avoid the convenient trap of right-wing socialism.
The only way in which the United States will escape the seemingly inevitable debt and currency crisis will be to cut spending, reduce taxes, pump growth driven by private investment and rising real wages, and strengthen the US dollar by reducing indebtedness and conducting a sound monetary policy.
President Trump’s economic agenda is rooted in a vision of a more resilient American economy. Despite facing significant challenges—such as heightened levels of market volatility, tariff negotiations, and shifting global alliances—President Trump remains resolute in his belief that the U.S. will emerge stronger and more prosperous (we agree). His administration’s focus on reducing trade imbalances, cutting excessive regulations, and unleashing the power of the private sector is setting the stage for sustainable economic growth. Though concerns about growth and the impact of fiscal policy changes have surfaced, Trump’s long-term strategy is designed to achieve a more efficient and competitive economy, not just for the U.S. but for global partners as well.
One of the most striking examples of this global shift is Europe’s reevaluation of its fiscal policies in light of U.S. economic changes. In response to shifts in U.S. foreign policy, particularly in terms of defense spending and international relations, Germany is now considering loosening its traditionally stringent fiscal constraints. This could result in increased investments in infrastructure and defense, potentially driving European economic growth and fostering greater competition on the world stage.
Meanwhile, China is also signaling a new phase of economic reforms, aimed at addressing the threats of stagnation and inefficiency. By blending stimulus with reform, China is positioning itself to navigate its economic challenges while potentially benefiting from more balanced trade relationships with the U.S. under Trump’s administration. Although uncertainties persist in global markets, there is an emerging belief that a more balanced and prosperous global economy is within reach, thanks in part to President Trump’s vision of economic rebalancing.
However, as the global economy rebalances, credit card debt among older Americans is becoming a pressing issue. A recent survey by AARP has revealed a troubling trend: nearly half of Americans aged 50 and older who carry credit card debt are relying on it to cover essential living expenses. This growing reliance on credit cards is exacerbated by rising costs in healthcare, food, and housing, placing a heavy burden on those already nearing retirement.
The survey paints a grim picture of how older Americans are struggling with their finances. Among those with credit card debt, 47% reported using their cards for basic living expenses, and 37% of them have accumulated more debt over the past year. Nearly half (48%) carry a balance of $5,000 or more, with some even surpassing $10,000 in debt. These figures are particularly concerning as they coincide with a time when older adults should be planning for a secure retirement, not facing mounting debt.
Healthcare costs have emerged as one of the leading contributors to this growing debt. With many older Americans on fixed incomes, medical expenses are forcing them to lean on credit cards just to get by. This situation is further exacerbated by high interest rates, making it increasingly difficult for individuals to pay off their balances. As a result, many are facing the tough decision of whether to prioritize paying off debt or saving for their future. For those aged 50-64, this financial strain is particularly acute, as they are at the cusp of retirement and must weigh the consequences of their financial choices.
The impact of this growing debt is not just immediate—it is eroding older Americans’ ability to save for the future. Nearly half of those with credit card debt report that their current financial situation is hindering their ability to save for retirement. This is a dire situation that requires immediate attention and action from both policymakers and financial institutions to provide older adults with the resources and support they need to regain control of their finances.
President Trump’s economic vision, with its focus on reducing tariffs, promoting private sector growth, and fostering fairer international trade, can be seen as part of a broader solution to these interconnected challenges. By creating a more dynamic and competitive economy, both in the U.S. and globally, the economic policies that Trump advocates could help alleviate some of the financial pressures on older Americans, especially if they lead to reduced healthcare costs and more sustainable economic growth.
However, while Trump’s economic policies aim to reshape global and domestic markets, it is equally important to address the financial realities faced by older Americans. Comprehensive solutions to the credit card debt crisis should include measures to reduce interest rates, expand access to financial education, and provide more robust healthcare support to ensure older adults can live with dignity and security in their later years.
Ultimately, the economic agenda of President Trump and the financial struggles of older Americans are intertwined. While the global economy undergoes a transformation, it is vital that the financial system evolve to protect those most vulnerable—especially older Americans who are facing unprecedented debt burdens. By supporting these individuals through targeted policies and economic reforms, we can create a future where both the U.S. and its citizens can thrive, free from the shackles of financial uncertainty.
Tyler Durden
Tue, 03/11/2025 – 15:05
