Expanding the deficit when we are near full employment adds fuel to the economy at the wrong time. As I said, if bigger deficits lead to overheating for an extended period, then the Fed will be forced to act more forcefully. 2018Q2 is currently the only quarter under Trump >4%, which IS a result of the tax cuts and spending increases. I expect Q3--which comes out next week, to be close to 4% as well. The underlying problem will be the wage pressures that come with a hot economy at < 4% unemployment.
Why does the Fed need to reduce its balance sheet? Certainly it affected markets as it accumulated assets, but by what economic rationale is it necessary to reduce it?
In fact, its BS will automatically decline as the assets are paid down (its MBS holdings, for example) and/or mature. The size of its BS doesn't mean a hill of beans to the real economy...
We disagree on the impact from S-H in 1930. Economies were already declining rapidly, and would continue regardless of S-H.