I like Jared Bernstein and Ro Khanna’s op-ed in the Washington Post today very much. In it they address two questions. First, what impact is Trump’s economic policy having?
Last week, one of President Trump’s top economic advisers, Larry Kudlow, argued that the U.S. economy is “crushing it,†posting boom-like numbers in key areas, all thanks to the leadership of the president.
Evaluating such claims usually begins with assessing whether the president should get credit for an economy he inherited in year eight of a solid expansion. But the fact that Trump is claiming credit for trends that were largely ongoing before he took office is one of the few ways in which he’s not much different from former presidents.
Instead, we’d like to drill down on the evidence for this “crushing it†claim. Who’s actually getting ahead in the Trump economy?
He then examines a variety of the things that have happened and then grudgingly comes to the right conclusion—that it’s too early to tell:
t takes time to plan investments, so it’s too soon to conclude the tax cuts haven’t made a difference. But none of the surveys of companies’ investment plans show any plans to ratchet up capital spending, including the Commerce Department’s monthly data on orders for capital equipment, the National Federation of Independent Businesses’ survey on plans for capital expenditures, and investment surveys by regional Federal Reserve Banks.
He neglects to mention the historic declines in unemployment for blacks and Hispanics. I notice, too, that he neglects to mention trade policy.
He then proposes a series of alternate policies about which I am skeptical. The only one of which I approve is his rural Internet proposal. I don’t think it would have a great deal of economic impact but I think it’s the effective equivalent of rural electrification or telephone service. In an Internet age lack of access to highspeed Internet connectivity is isolating and we need to be more connected with each other not less. The balance of his proposals are the same sort of crony capitalist ones the Obama Administration tried with predictable results. Political donors got rich while the programs underperformed.
IMO the Trump economic policies have been a mixed bag. We need more business investment. We haven’t had enough business investment other than in real estate for decades now. We don’t need more personal consumption, particularly when that personal consumption results in more imports from China, bought through retail channels that don’t need to expand in response to more sales because of Internet-driven advances in the fulfillment process.
I think we need more policies that are much more narrowly focused on domestic business investment. I’m agnostic on what those should be.
The comment about too soon to tell is partially, probably mostly, true. We are nimble, so we can make investment decisions in a 3+ month time frame. Large corporations can’t or don’t. So those remain to be seen. But make no mistake, before the order comes confidence and the animal spirits. Trump was an inflection point relative to Obama. Obama was great if you enjoyed puttering along in second gear.
The next recession and recovery will be over before we can pronounce the effect and wisdom of Trump’s economic policy. Reminds me of the saying attributed to Chou En Lai – “It is too soon to say”, about the effects of the French revolution.
I do think Trump gets credit (or more leeway) from the voters on the economy because his economic policy mix is different (focus on business investment, balancing trade) from anything tried in 30,40, maybe even more years.
However one slices it, the American economy for the past 20 years has not worked for enough people, and there was too much resignation by policy makers to that fate – perhaps that was the spark for the voters to try anything……
With the exception of his proposed expansion of the EITC, note how few people all of Mr. Bernstein’s proposals would have helped even if fully implemented all together. If that’s the best he can come up with from a blank slate, it certainly lends weight to your observation about “too much resignation by policy makers”. I don’t think it’s resignation. I think they like present policy too much.
The title of this post, “Grow the Economy” is not English. It is an invention of around 1980 that makes no sense unless you want to pass yourself off as hip and cool, rather than intelligent and thoughtful.
Grow is a verb that can be used as a transitive or an intransitive. As an intransitive, you can say, “corn grows” or “the economy grows.” As a transitive verb that needs a direct object, you can say, “I grow corn,” but “Trump is growing the economy” is dumb for two reasons, one of which is that it shows your lack of SAT intelligence, lack of thoughtful reading and susceptibility to NewSpeak.
Even n-Gram will show you:
Folks should remember that Mulvaney at OMB a couple of weeks ago based on what they are seeing, deficits increasing $100billion/year with he trump tax cuts. Deficit spending when the economy may end up giving us a bit more growth, but if it is at the expense of this debt, I am having a hard time supporting that. At some point we need to pay things off, or print a lot of money.
Steve