Trump's Economy is no Reason to Reelect Him

Donald Trump might be in trouble. His chances for reelection, according to recent polls, are dwindling.

In light of the last few weeks, it's hard to pinpoint what exactly Trump has done to damage his support. It may be because he called a 75 year old victim of police brutality an antifa agent, or claimed the end result of the civil war was "questionable", or it's the novel coronavirus- which has exposed the incompetence of his administration. It may be because he blusters and foams his slogans and epitaphs with the gusto of a fearful liar. Regardless, his once iron-clad support is slipping.

Despite his antics, conservatives still see Trump as their standard bearer. Many who cannot stomach his caustic rhetoric cite the economy as the last bastion of their support. I have seen conservatives shrug their shoulders and say- to the tune of "boys will be boys"-  despite his bluster, Trump is good for GDP. There is a performed sense of surrender- like an exhausted mother- where tepid Trump voters painedly recount their exasperation, but conclude their dogged support is justified.

This article is for these conservatives. The ones who sit on the fence. The conservatives who are so close to abandoning Trump but for the gilded promise of 4 percent growth. 

First, credit should be awarded where it is due. Trump oversaw the longest boom in American history. It has not been quite 3 percent (a number Trump's own Treasury secretary said was too optimistic), but it has been historic. Similarly, the stock market under Trump has been very good. The Dow Jones Industrial Average saw its highest numbers under the Trump administration and investors have been generally happy with Trump's laissez faire rhetoric.

As an aside, I should first acknowledge that the link between presidential policy and economics is a bit tenuous. Economic growth is often overly credited to presidents. Americans assume the president has a direct impact on how the economy performs. While not entirely true, one can point to certain policies and programs which help or hinder the natural boom and bust cycle. For the remainder of this article, I will take as given this caveat, and try to ascribe economic effects as best I can according to the research. Now, I will take a look at Trump's economy to see whether it warrants the fealty he's been afforded.

A good place to start is with jobs.

The economy under Trump has not expanded in terms of job growth any more than under Obama. Under Trump, the economy added 191,000 jobs per month, whereas under the Obama administration that number was about 227,000. Further, while Trump claims a "Blue Collar Boom", the jobs have been more often in the social service sector. The latter point is not a problem, except that these jobs pay much less on average.

The average fall in unemployment- in the same 35 month span- has been lower under Trump than under Obama (falling by 1.2 percent rather than an average of 2 percent). And the oft touted low-wage increase nationwide under Trump is mostly due to minimum wage increases at the state-level, rather than Trump's economic policies.

Further, while wage growth under Trump was roughly 3 percent in 2019, with inflation Trump's average falls to ~1.3 percent. Whereas, Obama's real wage growth was 2 percent on average. Which means Trump's wage growth is not only lower, but likely the slowing momentum of the Obama economy.

'But', a conservative might say, 'what about Trump's flagship policy: the Tax Cuts and Jobs Act (TCJA)?' The idea was, as it is so often under conservative presidents: to cut taxes, induce higher private spending, and increase overall GDP growth (as well as to attract foreign capital). This is meant to cover the outlays of the tax cut by increasing tax revenues. You might have noted by now the TCJA is Supply-Side economics. To be clear, this is a bad model. It didn't raise revenues under Reagan or Bush, and it's largely dismissed by orthodox (neoclassical) economists. There is no reason it would be any different under Trump. Bad economic ideas are still bad- no matter who uses them.

Unsurprisingly, the TCJA failed to reach its projected windfall, adding 1.6 trillion to the deficit and inducing only a temporary increase in GDP (Not to mention Trump's spending increases which have added to the US's annual deficit and total debt burden). These tax cuts run counter to the recommendations of most economists who generally advocate for lowering the deficit in times of growth and spending to stimulate demand in recession. Trump has done the opposite, which is irresponsible and harmful to the macro-economy. All of this has become especially prescient in light of the coronavirus economic crisis.

To add insult to injury, there is also no evidence of an inflow of foreign capital.

Trump did not improve the lives of those he claims to fight for. Blue collar workers were, on the whole, made worse-off by Trump's policies. The trade war with China hurt blue collar workers by artificially raising the price of inputs or intermediary goods, which raised production costs. The higher production costs were passed on to workers in the form of wage cuts and layoffs.

In Trump's 3rd State of the Union address, he touted his economy and claimed it was a departure from "years of economic decay" under the Obama administration. While it is true the economy expanded under Trump, the economic evidence suggests it was because of Obama's fiscal policy. Let us not forget that while Obama inherited the Great Recession, Trump inherited stability.

But that story does not fit Trump's rhetoric. Of course, if Trump is to be the quintessential blue-collar politician, he needs to have somehow 'fixed' the economy. To appeal to the working class, Trump needs to position himself as an outsider who gets things done when the establishment cannot. Without this anti-establishment narrative, his case for reelection would crumble.

But Trump's economy is not anti-establishment. His policies are built on bad economic intuition and right-wing establishment thinking. Trump has produced nothing novel. He has left his constituents out in the cold.

Donald Trump presided over a decent economy despite, not because of, his policies. For those who are tired of a narcissist who is inoculated against the plight of the most vulnerable- it's okay: you do not need to vote for Trump for the sake of the economy. His policies weren't helpful. We need and deserve better.