Recently, a group of leading CEOs enjoyed dinner with President Trump at the White House, discussing an American economy that he optimistically claims is on the brink of unprecedented growth reminiscent of the 1980s.
Yet, many attendees left feeling uncertain about whether the president truly grasps the economic landscape.
While they agreed that initiatives like tax cuts and deregulation could positively impact growth, there’s a consensus that the president’s approach probably won’t yield the results he envisions.
Despite the positive outlook, the reality is that the U.S. economy still grapples with challenges akin to those of the past, lacking the high growth and low inflation that characterized Reagan’s presidency, with scant evidence pointing toward a shift in that direction.
Moreover, the president appears unaware that rising prices represent the most pressing economic concern.
It’s not only a housing issue; various polls indicate that ongoing high inflation is stoking voter anxiety.
At this dinner, Trump confidently predicted a GDP growth of 6%, nearly double the current figure, arguing that more jobs would mitigate affordability issues.
He suggested that increased tax revenues and tariffs could help address the budget deficit and reduce costs further.
Interestingly, none of the CEOs present, including figures like Jamie Dimon from JPMorgan and David Solomon from Goldman Sachs, expressed doubts during the dinner.
However, behind closed doors, there was a noticeable lack of enthusiasm among them.
Conversations I had suggested that many, if not all, found the 6% GDP growth prediction highly unrealistic, especially given the current economic data.
They believe tariffs could hamper growth since retaliatory measures might limit the sale of American products abroad.
In addition, inflation seems to be on the rise, often attributed to higher costs from tariffs.
The affordability crisis is genuine, and the actions taken by Trump don’t appear to be effective at this moment, considering the Republicans lost several races just two weeks ago.
One insider commented, “Trump has some clever economic advisers, but there’s also a group of yes-men around him who don’t challenge his ideas.” She added, “I hope he’s right about achieving 6% growth because he really needs it.”
Fear is not a “crook’s job”
Then there’s Trump’s approach to address the affordability issue.
He’s floated ideas like 50-year mortgages to make homeownership more attainable while also criticizing Federal Reserve Chairman Jerome Powell for cutting interest rates.
Several CEOs have proposed alternative strategies, suggesting ways to encourage average citizens to invest in stocks, which historically outperform many other asset classes.
From what I gather, Trump’s advisers are aware the situation isn’t great, but warning him about it is seen as a sure way to lose one’s job.
It’s also worth noting that he’s not the only president to exist somewhat detached from reality. Joe Biden, for example, seems convinced about the stability of the border and the low inflation rate, while gearing up for another presidential run.
It’s understandable that those close to Trump might hesitate to label the economic situation as an affordability “crisis,” given that it supports more left-leaning narratives.
Moreover, Trump has dismissed the economic anxiety as mere “fake” concerns, which doesn’t really make the problems go away.
In fact, it prevents us from engaging in the necessary discussions about how to strengthen the economy.
MAGA tax increase
Unfortunately, that critical dialogue didn’t materialize during Trump’s recent meeting, as several CEOs remarked that extending mortgage terms actually raises home prices rather than lowering them.
People can end up borrowing larger amounts over longer periods, which means paying more interest in the end and accumulating less equity.
The president’s fixation on reducing interest rates to improve homeownership costs may miss the bigger picture.
Despite a reduced inflation rate, it still surpasses the target, compounded by the inflation brought on by previous policies.
Sure, prices for items like gasoline and eggs have eased, yet many other costs continue to climb.
Much of this pressure seems to stem from the tariffs, which, though decreased from initial proposals, still push prices higher.
Pushing Powell to lower rates amidst persistent inflation could exacerbate the situation. Inflation essentially acts as a tax on the working class, leaving them uncertain about how to navigate it.
This could be viewed as a form of a “MAGA tax increase.”
Time and again, Trump believes that he’ll soon resurrect factory jobs, bring down gas prices to alleviate inflation, and that these long-term mortgages will restore the American Dream, all of which he hopes will turn skeptics into ardent supporters.
Many believe that the Republicans could gain a foothold in the next midterm elections, driven by an economic boom reminiscent of Reagan’s era.
Like those CEOs I’ve spoken with, I sincerely hope he’s right.
Yet, the evidence increasingly suggests otherwise.
