A tale of two Trumps

Economic successes are undercut by trade wars, domestic vendettas

WE are now approaching the halfway point of the roller coaster presidency of Donald J. Trump, which makes overall assessment both necessary and treacherous. Given his erratic behavior, I am often reduced, in frustration, to saying that Trump has to be evaluated “a la carte.”

On good days, he cuts through the nonsense. On bad days, his rash and precipitate behavior dismays his staunchest supporters. Right or wrong, Trump marches only to his own drummer. In the beginning he had more good days than bad ones. As of late, the reverse is true. Here is a partial scorecard on the economic front.

The good news is that, starting in his first term, Trump took dead aim on Barack Obama’s misguided economic policies, which rested on the foolish belief that the only path to economic prosperity was through massive government intervention in the labor and capital markets. Obama’s DoddFrank legislation of the banking industry and his overwrought Affordable Care Act were key drivers of the lowest peacetime growth rate on record. Progressives sought to soft-soap their failures by insisting that the “new normal” was slow growth for any mature economy.

At the gut level, Trump had no patience when red tape foiled his own businesses. So he pushed back hard for lower taxes and deregulation. He cut the corporate tax rate. He cut back on banking regulation. He authorized the completion of the Dakota Access Pipeline that had been mired in red tape, increasing both energy production and foreign exports. He cut back on the Obama excesses in the enforcement of the civil rights laws dealing with sexual harassment and racial discrimination. And most critically, he simply slammed on the brakes on the administrative enforcement of virtually existing laws.

Philosophy matters. When in doubt, the Obama administration investigated first and thought later. Trump reversed that mindset by letting businesses and workers find their own way. The upshot was rapid reduction in unemployment, not just for the skilled and rich, but also for teenage workers, minority workers and even ex-cons looking for a job. Over intense Democratic opposition, he has appointed not only two excellent Supreme Court justices, Neil Gorsuch and Brett Kavanaugh, but a huge cohort of intellectually principled judges at both the appellate and District Court levels, who collectively will rein in the excesses of the administrative state.

In contrast, Trump’s recent moves have proved disastrous. Philosophy still matters. It is incomprehensible how Trump has compartmentalized his mind so that the free-market principles which dominated his first year have been flouted in his second. His foolish and dangerous trade wars have turned foreign friends into foreign enemies, while hurting the economic prospects of his own blue-collar constituency. Trump wrongly assumes any deficit with any trading partner means the United States has been ripped off. But foreign trade consists of thousands of individual transactions, all of which are win/win for their participants, no matter whether Americans buy or sell. Some trade deficit is certainly likely to arise, but so what? When foreigners sell more than they buy, they reinvest the difference in the United States.

All his hyperventilating about the loss of American jobs to cheap labor overseas is inconsistent with both the domestic employment surge and basic economic theory. Many of the jobs that went overseas would have been lost regardless. Inefficient firms cannot survive. Efficient ones grow. Indeed, one of the hidden benefits of free trade is that it exerts a constant pressure on both federal and state governments to clean up their own regulatory acts so that their businesses are better able to compete in both domestic and foreign markets.

Trump’s mercantilist positions have done much to negate the gains from his domestic programs. His efforts to slow walk NAFTA have hurt both American buyers and sellers in their relationships with our two key partners, Canada and Mexico. Sadly, even after reaching a long-awaited agreement, a resentful Trump has yet to remove the tariffs on steel and aluminum, as he had previously promised. And he still thinks that somehow he can make Mexico pay for a controversial wall between the two countries that should probably not be built anyhow. He then ups the ante with partial government shutdown when he can’t get his way.

Worse still, Trump, ever the riverboat gambler, seems to relish his trade war with China, notwithstanding the economic dislocations it imposes on firms that depend on key Chinese products to make their own goods for domestic and export markets. Nor has Trump

offered any good reason to deprive American farmers of commodity sales to China — losses that cannot be made up by introducing a set of expensive and ineffective subsides from general revenues.

No one doubts that China is a serial offender when it comes to theft of intellectual property. And the country remains a past master at the fine art of discriminatory enforcement under tax and antitrust laws against all foreign firms. But the trick is to fight where the United States and its allies are on strong ground, through the World Trade Organization and courts. It is not to inflict collateral damage on friend and foe alike.

Trump’s ultimate tragedy is this. The success of any economy depends on the integration of sound domestic and foreign policies. Trump’s foolish

trade wars undercut the success of his domestic policies. And, as of late, even here he has gone over the top in his nonstop harangue of Federal Reserve Chairman Jerome Powell for the temerity to raise interest rates from their historic lows. It is wrong for the president to insist that the Fed is “the only thing wrong with the economy.” His fuzzy thinking and meddlesome behaviors are a far bigger problem. Yet he seems unable to realize that the stock market rises with each hint of a trade truce and tumbles with each new sign of a trade war.

Pity that Trump is unable to read the tea leaves.

Tim Brinton