Let’s talk Trump’s affordability economy

 

Or more specifically two proposals he made. The first being the ten percent cap on credit card interest and the second the limitations that large companies cannot own homes just to rent.

At first glance these are a populists dream: affordable credit and bringing houses back to the market so Americans can own a piece of the American dream.

What does it really mean?

First there is some legitimacy for populists in this thinking. The blowback from the supporters of credit cards and the companies is pretty strong. This is a surface reason to believe these policies might have merit. If the rich are against it, then the rest of us should be for it. Too often when the rich complain they know they might lose something or it won’t benefit them. So how plausible are these proposals?

Let’s pretend we aren’t dealing with the Donald Trump we all know and love. If a Democrat had proposed these, they would be dead on arrival. Republicans backed by all the business interests would shoot this down faster than whatever metaphor floats your boat at the moment.

I think there was some Democrats in Congress trying to garner some interest for this type of proposal before Trump offered it.

In normal times Republican Presidents aren’t offering these proposals. Currently many Republicans are trying to figure out how to not support these so they get campaign contributions from the banks, but not come out against the President. The wonderful tight rope many muster especially one Speaker named Johnson.

The reality for these Republicans would be worse, but our loveable President has squandered quite a bit of political capital of late. It is a bit easier not to have to jump on this bandwagon of policy proposals and still act like they are in support of the President by focusing on other wonderful acts by his administration.

Now let’s break it down under Trump. Trump doesn’t have much capital with people outside his supporters. His supporters love hearing him propose these two policies. This is what they voted for. It all sounds good. Unfortunately, these proposals are full of Trump bluster. How much does he truly believe in these two proposals? My guess and probably yours is not much. Is this more campaign talk? Does he get to come out later closer to the election and say I am working for you so vote for my people when in reality he knows this is smoke without fire.

Or worse the businesses find ways to appease him and the two proposals die on the vine. Or the Democrats jump on it, but Johnson finds a way to squash their proposals without interfering with Trump’s rhetoric? That is probably going to happen. Johnson can stand in front of the cameras with his little smirk and say we are working hard to bring affordability back all the while acting like the Democrats are crazy for bringing up the same proposals Trump just did.

Yes Trump is loving the word affordability right now, but what will truly come of it. He is a showman and affordability has become the center stage word. He can definitely run with it. That is his strength.

Yet my feelings are it is all talk for now until he can find something else to entertain people to distract them from his real disasters. The businesses these two proposals affect will find a way to change Trump’s direction. And we all know what that will be. And once this quiets down, he will find another proposal to feed to his supporters so he can continue his charade of saying what they want while getting what he wants behind his supporters back.

Reality though is we need some real action on credit card interest rates. I don’t know if there is a magic number that caps interest that benefits us and doesn’t frighten the banks into drastic action. The ten percent number will frighten them the more it is bantered about. And some of their complaints that ten percent is so low it will prevent people from getting ready credit are valid, mainly to them, but valid overall. The banks base credit on risk factors and how many people really aren’t a risk at ten percent. That number probably does drop significantly. There would be some people who could take on more credit and afford it at ten percent versus the thirty percent they are paying now and would benefit. Unfortunately we as people of the United States aren’t good with credit. Better education to young people would help, but at the moment the current population is struggling with debt and lower interest rates aren’t going to put too much of a dent in habits.

Credit card debt is out of control. Lowering interest could help, but people would have to cut up cards so they could pay off or down their current debt for ten percent to make a meaningful impact. And that is not what the banks would want. Nope they need people to continue to spend/borrow at an interest rate that pays off all the credit cards that go into default. We have painted ourselves into a corner, both the consumers and the banks. Cutting rates to ten percent in theory is great, but right now we wouldn’t know what to do with ourselves if we had access to more money. It has become a very dangerous nature for us. There might be a number that is low enough to help a good amount of people lower their debt a bit; spend enough so the economy keeps going and allows the banks to manage some of the risk. Yet this also means they would have to accept less profits. And yep we are all laughing on the floor with that wild thought. Lower profits would be a true beginning, but Wall Street is addicted to greed so that ain’t happening.

And the same thinking applies to companies who are making an enormous fortune renting houses and all the while building up a very strong balance sheet of value. They aren’t selling to make Trump happy.

So again Trump sounds great to his supporters, yet the reality is more complicated and the real solutions take too much away, no matter how small, for people who don’t give a flying fart what the people need.