THE TRUTH ABOUT THE TRUMP ECONOMY
DonaldTrump and his legions are not tightly tethered to factual reality, but they are willing to grab on to it when it suits them. One of those occasions is when the official unemployment rate— which as a candidate he denounced as “the biggest joke there is in this country”— comes down, as it did in October, reaching 3.7 percent.
For voters on the fence, who may not like his many coarse and racist views, the state of the economy may be enough to persuade them to vote Republican on Tuesday. Even critics have to admit that whatever else he has done wrong, Trump has managed not to turn the boom to bust. The combination of solid growth, low inflation and unemployment, and rising hourlywages is hard to beat.
Republicans give all credit toTrump and theGOP-dominated Congress for cutting taxes, rolling back regulations, creating jobs and restoring theAmerican spirit of enterprise. But the claim that the president has raised the economy fromthe doldrums and injected it with new vitality is largely amyth. As an economic player, hewas born on third base and thinks he hit a triple.
Growth has been good, with gross domestic product rising at a rate of 4.2 percent in the second quarter of this year and 3.5 percent in the third. But the euphoria being felt by Republicanswas absent when GDPgrowth exceeded 4.2 percent in four different quarters under Barack Obama. The trick is to sustain such high rates, which Obama couldn’t andwhichTrump has yet to prove he can.
Though unemployment has fallen, job growth has not actually accelerated. In the first 21months of Trump’s tenure, the economy added fewer jobs than it did in the previous 21months.
For a long time, he took credit for the rising stock market. But the Dowfell by 5.1 percent last month, and the S&P 500 dropped 6.9 percent— making it, TheWall Street Journal noted, “theworst October for the S&P 500 since 2008.”
The stock market is stillwell above the level on ElectionDay 2016, with the S&P 500 up by 27 percent. But that index rose by 35 percent over the same period in Obama’s first term.
The tax cutsTrump signedmaywell have boosted growth. But Republicans might notwant to look too closely behind the improvement. An analysis by TheWall Street Journal concluded that “faster government spending accounted for nearly half of the acceleration” that has occurred sinceApril 2017.
Corporate tax cutswere supposed to unleash a flood of business investment. But it grewat only a 0.8 percent pace last quarter, the slowest in three years.
The immediate benefits of the tax cuts also have to beweighed against the longterm harms. The budget deficit ballooned by 17 percent in the fiscal year that ended in September, and the Congressional Budget Office estimates that the tax packagewill add $1.9 trillion in government debt over the next decade.
The regulatory rollbackmay also be good for some industries, particularly those that pollute. But putting more toxins in our air andwater and more greenhouse gases into the atmosphere willwork to the eventual detriment of human health, the climate and the overall economy.
IfTrump’s tax cuts and deregulation are welcome in the businessworld, his trade policies have not been. He discarded the Trans-Pacific Partnership and placed new tariffs on steel, aluminum, solar panels and a range of Chinese goods.
Economist Steven J. Davis of theUniversity of Chicago and theHoover Institution maintains an index of “trade policy uncertainty.” It has consistently been higher duringTrump’s time in office than at any time since 1994. Davis says the president’s trade policy has had a “small nega- tive effect onU.S. business investment” and “has the potential to cause a good deal more economic pain.”
Then there is the lowinflation brought about by the Federal Reserve, which lately Trump has blasted for raising interest rates. Were the Fed to defer to his wishes, we could be in for a future of rapidly rising prices.
The American economy is showing a vitality thatTrump is happy to attribute to his policies. But what it needs nowis a president who grasps that the best thing to do is to stay out of theway. And staying out of theway is not somethingTrump likes to do.
Steve Chapman, a member of the Tribune Editorial Board, blogs at www.chicagotribune.com/chapman.