Interview with David Bizer, GCW co-founder and former adviser to U.S. Presidents, written by Park Joon-sik and published in Money Today 19 January 2025 (translated from the original Korean).

Diplomacy between nations relies on stability and consistency. However, Donald Trump, who is about to become the president of the world's most powerful country, the United States, is a person who is breaking such conventions. “What makes Donald Trump distinctly different from traditional politicians is that his counterparts cannot be sure of his next move.” David Bizer, co-founder of Global Customized Wealth (GCW), said in an interview with Money Today that "uncertainty gives Trump a great advantage in negotiations compared to traditional policy leaders," but also pointed out that "the approach of using tariffs as a negotiation tool has important limitations." Bizer holds a Ph.D. in economics from Stanford University, is a capital market expert who worked at Lehman Brothers on Wall Street, and served as an economic and financial advisor to former U.S. Presidents.

He emphasized that "it is inconsistent to use tariffs as a negotiation tool while at the same time relying on them as a long-term budget source." This means that if tariffs become routine and there is no room for change, the other party will find another response. It can also be interpreted that it is not good to have tariffs fixed for negotiation power. It is known that Trump is also considering a plan to gradually raise tariff rates rather than raising them all at once. Bizer pointed out that Trump's tariff argument has "game-theoretic elements" while saying, "Even if one country always runs its economy at the long-term optimal trade solution, while others do not, the world could end up in a suboptimal, unstable quasi-free trade system". In fact, Trump had already started the game by threatening tariff bombs against allies Canada and Mexico before taking office. Canadian Prime Minister Justin Trudeau announced his resignation, and Mexican President Claudia Sheinbaum is concerned about the influx of illegal immigrants and the drug fentanyl, while also seeking to improve relations with the United States.

"There is no free lunch"

Trump threatens to withdraw from the North Atlantic Treaty Organization (NATO) ahead of his second term, arguing that there is no need to maintain the alliance unless member states spend more than 5% of their GDP on defence.

"We are contending with authoritarian powers who have a very different concept of the world than ours and may seek to impose it onto others. An important component of an effective response is through continued economic strength”, Bizer said. “However, a significant challenge to the United States’ status as the world’s greatest economic power is its status as the world’s largest debtor. We do not have a national debt situation that is on a sustainable path and difficult adjustments will need to be made." He added that “Spending reductions alone will likely not be enough to stabilize the budget, because they are easily reversed.  The budget process and policymakers’ incentives to approve spending levels relative to taxes that may not be in the national interest over the long-term should be closely examined."

Trump has said he would actively explore the adoption of cryptocurrencies.  Bizer added, “The regulation of cryptocurrency has probably gone too far”. However, Bizer said “However, the idea of creating a national Bitcoin reserve is undesirable. The reasons for this are:  first, a national Bitcoin reserve does not solve the core problem of unsustainable national debt; second, in its capacity as the world’s innovation hub, the government shouldn’t be picking winners (such as Bitcoin); and finally, it is not in the public interest to support the price of Bitcoin by accumulating a stockpile of it”, Bizer argued.

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Is inflation Trump's fault or Biden's?

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Regarding the claim that President Joe Biden's inflationary mistakes led to Trump's reelection, Bizer added, "It is true that the deficit worsened during Trump's first term, but the Biden administration implemented a larger fiscal injection at a time when the economy was recovering from the pandemic," and "Even scholars who worked in past Democratic administrations warned that the fiscal injection would be excessive and lead to inflation."

Bizer emphasized that "When an administration prioritizes issues other than inflation, it tends to lose the next election and the other party takes power”, and “The recent presidential election results were influenced by many factors, but the rise in inflation was a powerful contributing factor.”

Bizer pointed out that in addition to inflation, the US-China trade imbalance that has accumulated for more than 20 years has had electoral implications. "In 2001, the US normalized trade relations with China, and China joined the World Trade Organization (WTO), the supply of cheap goods has hurt employment and livelihoods in certain regions”, and  “the burden of trade has been concentrated in the so-called Rust Belt states, which has had an impact on elections.”

“The policy calculus of sweeping trade agreements should include those who lose from trade-inspired realignments and take into account the speed of adjustment to the new trade equilibrium.” Bizer said, noting that “the failure of effective labor policies to help retrain and redeploy displaced workers has had political consequences.”

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Government restructuring, immigration policy success possibilities

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Trump has appointed Elon Musk, a successful entrepreneur and Tesla founder, as head of the Department of Government Efficiency (DOGE) to curb budget waste and prepare for structural reform of the public sector. "National security concerns and an aging population are putting upward pressure on a significant component of federal spending," Bizer said. “Unless we place the entire budget, not just the discretionary component, under scrutiny, the scope for meaningful change (on the deficit issue) is relatively narrow,” he said. “An important policy focus should also be to look at regulatory overreach and ensure that regulations are achieving their intended purpose and avoiding unintended negative consequences.”

Trump has pledged to severely restrict illegal immigration and promised mass deportations. Bizer said, “The United States does an exceptional job as compared with many other countries in assimilating immigrants into American culture, and it would be a mistake for policymakers to restrict immigration in some wholesale or indiscriminate manner.” He predicted, “Immigration should be controlled with sensible policies, but as with trade, the speed of adjustment has social and economic consequences.”

The United States is experiencing rising housing costs and income inequality, which are increasing the burden on social structures. Bizer suggested, “When regulating the amount and pace of immigration, it would be reasonable for policymakers to also define the attributes of potential immigrants the country wishes to attract.” It seems to be in light of the recently discussed H1-b visa for American college graduates and the expansion of permanent residency for American college graduates.

Fed Turns Hawkish, Needs to Control Pessimism

The Federal Reserve, the central bank, recently lowered its interest rate forecasts and is preparing for the possibility that inflation will not ease as quickly as initially expected. “It is important for the Fed to continue to signal to the market that it is taking inflation seriously,” said Bizer. “If the private sector begins to doubt the Fed’s commitment to price stability, they will begin to build inflation expectations into their future plans, which creates a vicious cycle that perpetuates inflation.”

He continued, “Formally, the Fed operates independently of the executive branch, but the President appoints the Fed’s leadership and Congress confirms them. Moreover, Bizer observed that the Fed Chair, the Treasury Secretary and the CEA Chair have been meeting on a regular basis for decades. “A sharing of views is inevitable and desirable as long as the political tail doesn’t wag the monetary policy dog”,

To read the original article, please click here: https://news.mt.co.kr/mtview.php?no=2025011810585170896