CampeadorSo for Brexit, a depreciating currency is a disaster!
And for the U.S., an appreciating currency is a disaster!
So which one is it? I'm inclined to get into this deeper argument with you, but I also know that you frequently recycle the words of others and pass them off as your own. So honestly, I cannot be sure if I'm arguing against you, or the NYT, or some liberal Keynesian economist.
You've certainly proved apt at stealing my own words and passing them off as your own even within the confines of just this thread.
To give you the short answer, it is this:
The projections you are attempting to make (and those you regurgitate) are based on a situation of ceteris paribus (all other things being equal), essentially that all other variables will remain constant.
Should the interest rise (as it most certainly needs to) then domestic savings will increase. With a better business environment (lower corporate taxes, less regulation), I would expect domestic investment to also increase. You also assume that lower corporate taxes will mean less tax revenue, which isn't certain, it could easily generate more revenue (if the loopholes are close). Therefore, the need for foreign investment (which I assume also includes the Chinese buying U.S. debt), becomes much less important. Recently, the Chinese have been offloading U.S. debt, yet the trade deficit remains high. Also, the ability for US companies to bring their money back into the United States will further diminish the need for foreign injections of capital from countries like China.
If policies are implemented to hold China accountable for their tariffs on U.S. goods, and their currency manipulation, the trade deficit with them will fall, regardless of the stronger U.S. dollar. Also, as you frequently like to misrepresent, trade deficits aren't necessarily bad when they're a result of free trade between equal trading partners. Between equal trading partners, trade deficits and surpluses tend to diminish over the long term. The fact that this has not happened with countries like China shows that the U.S. and China are not equal trading partners.
Also, I know Trump's spending projections come from the Congressional Budget Office (as far as I can tell), but it all seems very premature. Not to mention, this is the same Congressional Budget Office that argued that Obamacare would save the government money, I question their methods (despite how impressed you may be with all their credentials). For them to say that Trump will add almost $20 trillion to the deficit in 8-10 years is laughable.
Christ, they're not apples to apples situations here.
One of Trump's main points during his campaign was reducing the trade deficit. An appreciating currency is not good for that, a depreciating currency is. But on the whole, a depreciating currency is not a good thing (look at Japan). This isn't Keynesian economics, this is common sense.
Now, on to your claim about interest rates and taxes.
Interest rates will rise, but not to the point where they make savings an attractive option. Interest rates will also need to be backed up by a stable economy, and a stable economy is not one that sees capital outflows which will happen if Trump enacts his tariffs. Lower corporate tax rates, lower personal tax rates, they are all being lowered. There is not enough US cash abroad to compensate for the loss of foreign investment. Current foreign investment stands at ~$3 trillion dollars (
source). The total amount of US cash abroad? Somewhere around $2.1 trillion dollars (
source and
source). So, let us assume we lose 50% of our FDI, and regain 50% of our cash abroad (we won't regain 100%, there will be ways around it as there have always been). You have a net of $-0.4 trillion in this country.
Now, you may claim that we will see more coming in than leaving, but that first source indicates the US is seeing the weakest capital inflows in the past ~12 years (2016 report only went up to 2014). Guess what the largest sector is for FDIUS. Manufacturing. Guess what happens when the dollar appreciates. Less exports. Guess who gets hit. Manufacturing.
Anyways, now, let us assume that they some get a positive inflow. What is to say that money is put to use in the economy versus being put into the pockets of the shareholders, the very people who are already paying lower tax rates? Because that is exactly what some of them do (
source). Additionally, the dollar would appreciate from the conversion of foreign currency to US dollars.
See, you believe that China is not willing to engage in a trade war. They are, they have already said as much. And do you know who loses in a trade war? The blue collared workers that elected Trump in the first place. You fear a Democrat-led government, but his policies would play many of these people right into that. Ironically, it is believed that a trade war is the exact opposite of what is needed to reduce a deficit (
source).
And China is going to have to rapidly change how they engage with Western countries as the IMF has now appointed their currency as one of the Special Drawing Rights currencies. This means it will be in the best interest of China to keep their currency stable, and not to devalue it as it will now be used to back global reserves. Hell, the offloading of US debt is an indication that they want to prop up the yuan, not devalue it.
But please, continue with your misinformed views.
And please, argue with the CBO all you like, but they are the most bipartisan group out there with estimates.