The Trump Economy

February 8, 2020

 

Two things that explain the economy under Trump. First is that the economy was on the rebound from the Great Recession when he came into office and it was on a rebound that took longer than necessary because Republicans opposed and limited the fiscal stimulus needed for that rebound by hollering and yelling about the deficits (which were mainly caused by the Great Recession) and second when it was obvious that we were heading for full employment Trump and his fellow Republicans suddenly ignored deficits and went on a tax cutting and spending spree to put the economy on a sugar high of unprecedented deficits risking our future - at some point we will pay for this and a future president will be blamed.

 

For now the economy feels really good and Trump is very likely to get reelected because of that, unless he keeps shooting himself in the foot with his reckless trade wars and his cozying up to enemy to dictators and pissing off our friends and allies. But in the U.S. national elections, especially when an incumbent is running, it is the performance of the national economy that is largely decisive.

 

We are at full employment. And when the economy is at full employment is when should at least have smaller deficits if not a downright balanced budget. An exception could be deficits for capital spending on roads, highways, bridges, environmental spending on cleaner water and rivers and school buildings. In fact, I believe we should have a separate category in the budget for capital spending which accounts for spending on public capital, things that it makes sense to issue bonds for because they will obviously bring a good return on the dollar. But Trump has not pushed for such public capital improvement projects, despite of his frequent boasts that he is a builder a deal maker. The only thing he apparently wants to build is that big, beautiful wall on the Mexican border.

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