Three of the biggest challenges Trump will face trying to fix Biden's mistakes
2025-01-02
Category: opinion

The resounding win by Trump and the Republicans in November signaled that the country is desperate for change, with Americans clearly saying to Washington "this isn’t working" vis-à-vis the current state of the US. While the mandate may be clear, the execution of that change is going to be a gigantic challenge. The Biden-Harris administration has left our fiscal house in complete disarray, limiting many of the options that will be available to Trump, as well as putting core policy proposals at odds with our fiscal reality. Here are three of the biggest challenges that the incoming administration will have to navigate. LOYALTY MATTERS: TRUMP PICKS ALLIES AND SUPPORTERS TO FILL OUT HIS ADMINISTRATION Spending cuts and the deficit With a $36 trillion debt load that is above 120% of the GDP and growing at a pace of around $1 trillion every 100 days and a deficit that is double the historic average in terms of a percentage of GDP, any spending cuts will require careful choreography. Tools and tactics that may have been able to be used in the past now must be wielded much more carefully.  With disruptors Elon Musk and Vivek Ramaswamy heading the Department of Government Efficiency (fondly known as DOGE), they will easily be able to identify ample spending and regulatory cuts. However, the execution must be to prioritize those efforts that increase GDP before they cut spending. Massive government deficits have been propping up US GDP. Taking some of that away will immediately do the opposite, lowering GDP. So, private sector growth needs to be turbocharged first. Otherwise, if the GDP comes down and we enter a recession, the US will see lower tax revenue and then we may end up with bigger deficits. This could impact the global economy and markets as well. The focus and plan are important, they just need ultra-careful implementation so the economy doesn’t go haywire in the process. Oil production One of Treasury Secretary nominee Scott Bessent’s three stool legs for his "3-3-3" economic plan (along with deficit cutting) is unleashing growth by growing our oil production by an incremental 3 million barrels or more per day. More production, the theory goes, will increase our energy independence and lower costs on just about everything. The challenge is that the oil industry needs a certain price to operate profitably and even higher prices to make the investments and fill the pipeline (no pun intended) for future drilling and refining. A recent Wall Street Journal article noted that, "U.S. energy companies on average say they need WTI crude prices to be at least $65 a barrel for drilling to be profitable and $89 a barrel for them to increase drilling substantially, according to the latest survey by the Kansas City Federal Reserve." Experts believe that even with deregulation in the industry, there may not be enough cost savings to shift this dynamic. Trying to spur growth with oil production when there is a hard floor on oil prices from a practical standpoint is a conundrum. This is a puzzle that the Trump administration will need to solve.  Tariffs versus the dollar The Trump administration has been focused on both tariffs and a weaker dollar, a dynamic that again creates a paradoxical challenge. CLICK HERE FOR MORE FOX NEWS OPINION&nbsp; On the tariffs side, while some of the proposals may be Trump’s "art of the deal" to put new trade and economic agreements in place globally, other tariffs could have chilling effects on small businesses and overall economic growth. Moreover, tariffs would be expected to strengthen the US dollar. Yet, a critical focus of the administration is to weaken the dollar in order to make it more competitive globally and effect many of the administration’s policies and objectives. CLICK HERE TO GET THE FOX NEWS APP I believe that Trump, Bessent and team will have a difficult time with widespread tariff hikes in the context of what they are trying to achieve overall. Perhaps more targeted tariffs where there are real national security issues is where the policy wish will become reality. Trump has lined up many strong individuals on his team and has an entrepreneurial vision, but his task economically and financially remains a daunting one. Americans will need to have patience as good policy objectives are faced with the US’s stark fiscal realities.