Truth about Trump economy

Trump may be a good president for the top 1% – and especially for the top 0.1% – but he has not been good for everyone else. If fully implemented, the 2017 tax cut will result in tax increases for most households in the second, third, and fourth income quintiles.

Making matters worse, the growth that has occurred is not environmentally sustainable – and even less so thanks to the Trump administration’s gutting of regulations that have passed stringent cost-benefit analyses. The air will be less breathable, the water less drinkable, and the planet more subject to climate change. In fact, losses related to climate change have already reached new highs in the U.S., which has suffered more property damage than any other country – reaching some 1.5% of GDP in 2017.

The tax cuts were supposed to spur a new wave of investment. Instead, they triggered an all-time record binge of share buybacks – some $800 billion in 2018 – by some of America’s most profitable companies, and led to record peacetime deficits (almost $1 trillion in fiscal 2019) in a country supposedly near full employment. And even with weak investment, the U.S. had to borrow massively abroad: the most recent data show foreign borrowing at nearly $500 billion a year, with an increase of more than 10% in America’s net indebtedness position in one year alone.

Likewise, Trump’s trade wars, for all their sound and fury, have not reduced the U.S. trade deficit, which was one-quarter higher in 2018 than it was in 2016. The 2018 goods deficit was the largest on record. Even the deficit in trade with China was up almost a quarter from 2016. The U.S. did get a new North American trade agreement, without the investment agreement provisions that the Business Roundtable wanted, without the provisions raising drug prices that the pharmaceutical companies wanted, and with better labour and environmental provisions. Trump, a self-proclaimed master deal maker, lost on almost every front in his negotiations with congressional Democrats, resulting in a slightly improved trade arrangement.

And despite Trump’s vaunted promises to bring manufacturing jobs back to the U.S., the increase in manufacturing employment is still lower than it was under his predecessor, Barack Obama, once the post-2008 recovery set in, and is still markedly below its pre-crisis level. Even the unemployment rate, at a 50-year low, masks economic fragility. The employment rate for working-age males and females, while rising, has increased less than during the Obama recovery, and is still significantly below that of other developed countries. The pace of job creation is also markedly slower than it was under Obama.

Again, the low employment rate is not a surprise, not least because unhealthy people can’t work. Moreover, those on disability benefits, in prison – the U.S. incarceration rate has increased more than sixfold since 1970, with some two million people currently behind bars – or so discouraged that they are not actively seeking jobs are not counted as “unemployed.” But, of course, they are not employed. Nor is it a surprise that a country that doesn’t provide affordable childcare or guarantee family leave would have lower female employment – adjusted for population, more than ten percentage points lower – than other developed countries.

Even judging by GDP, the Trump economy falls short. Last quarter’s growth was just 2.1%, far less than the 4%, 5%, or even 6% Trump promised to deliver, and even less than the 2.4% average of Obama’s second term. That is a remarkably poor performance considering the stimulus provided by the $1 trillion deficit and ultra-low interest rates. This is not an accident, or just a matter of bad luck: Trump’s brand is uncertainty, volatility, and prevarication, whereas trust, stability, and confidence are essential for growth. So is equality, according to the International Monetary Fund.

So, Trump deserves failing grades not just on essential tasks like upholding democracy and preserving our planet. He should not get a pass on the economy, either.

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Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. His most recent book is `People, Power, and Profits: Progressive Capitalism for an Age of Discontent’.

Copyright: Project Syndicate, 2020.