In the cover feature of the Summer issue of Regulation, I review the American economy and the economic performance of the Trump administration before Covid-19 hit. I review the evidence on unemployment, GDP growth, wages, stock prices, regulation, trade, public finance, etc. Nine figures illustrate my evaluation. A short excerpt on only one of the topics covered:
In the spring of 2016, then-candidate Trump told Washington
Post reporters Bob Woodward and Robert Costa, “We’ve got to get rid of the $19 trillion in debt,” referring to the gross federal debt (which actually was $18.1 trillion at the end of 2015). “How long would that take?” the interviewers asked. “Well,” Trump answered, “I would say over a period of eight years.” Would he increase taxes to achieve that? “I don’t think I’ll need to,” he replied. “The power is trade. Our deals are so bad.”It’s unclear why he segued to trade. A charitable interpretation
is that he confused the federal government’s budget deficit
with the country’s trade deficit, which are two very different
things. But assume that he was not confused; eliminating a
federal debt of $18.1 trillion in eight years would have required, over each of those eight years, a reduction in expenditures of 61% or an increase in taxes (which make up nearly all federal revenues) of nearly 70%.So, what did President Trump do about the annual deficit
during his first three years in office? As Figure 8 shows, he oversaw an increase in the deficit from $585 billion in Obama’s last year to $984 billion in the fourth quarter of fiscal year 2019. … The increase was due mainly to higher outlays.
As you will see if you read the article (you can download the pdf version), I tried to present a balanced evaluation.
READER COMMENTS
TMC
Jun 18 2020 at 7:19pm
“A charitable interpretation is that he confused the federal government’s budget deficit with the country’s trade deficit, which are two very different things. ” The trade deficit doesn’t make sense here in regards to the quote. Sounds like you’re the one confused. His argument is, whether right or wrong, that other countries profit far more than we do in trading with us. There was a decent amount of literature that the US didn’t benefit from NAFTA, as free trade proponents predict, but I think he over estimates the value lost. I’m for free trade for the sake of the freedom itself, but think it’s value is oversold economically.
Alexander
Jun 19 2020 at 4:07pm
In respect to economics trade disparities in profitability differences are irrelevant. What is sought from trade is the maxing of production and the trading with others for products we have that require low opportunity cost for us vs them. The fact that other countries have dollor amounts higher gained does not matter. That being said “free”trade agreements are largely in place anyway in the modern world.
Jon Murphy
Jun 21 2020 at 2:10pm
What literature was this? I am unaware of a single study that found the US didn’t benefit from NAFTA. Everything I have seen has the US benefitting between 0.1-0.2% GDP growth, which is what economists forecasted at the time.
Jon Murphy
Jun 21 2020 at 2:11pm
Right, which is why Pierre thinks Trump was confused. The segue from government deficits to trade makes no sense whatsoever.
Phil H
Jun 18 2020 at 7:53pm
This is my major economic critique of centre-right parties everywhere. They make political hay out of deficits while they’re out of office, and then rack up the deficits when they’re in office. Centre-left parties aren’t fiscally responsible, either, but they don’t pretend they’re going to be. I don’t really know what’s at the bottom of this deep mendacity about finances on the right, but it seems to be very pervasive.
Pierre Lemieux
Jun 18 2020 at 9:19pm
One hypothesis: They have no ideology so their desire to be elected is 100% pure. They will reach for the median voter with ferocity. They will also lie with nonchalance.
Craig
Jun 18 2020 at 9:54pm
Occasionally one hears it from the left in opposition.
“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. … I therefore intend to oppose the effort to increase America’s debt limit.”
— Then-Sen. Barack Obama, floor speech in the Senate, March 16, 2006
But don’t worry guys, there IS a silver lining, we’ll look like Argentina soon!
Thomas Hutcheson
Jun 19 2020 at 11:21am
I think Centrist coalitions like Obama’s and Bill Clinton’s tend to be more fiscally responsible with the structural deficit than right-wing coalitions like GWB and DJT. Neither WJC nor Obama passed deficit-increasing reductions in taxes on high income people. ACA was partially “paid for” the but Medicare drug benefit was not.
Fred_in_PA
Jun 19 2020 at 11:01pm
I wonder if the answer isn’t that Congress controls the purse strings.
(And that Americans prefer divided government.)
(Outside events, such as the coronavirus pandemic, will obviously play a role, too. Although, as of the date of Lemieux’s article, corona hadn’t happened, yet.)
A better test would be to compare what Congress members said vs. what they do. (Rather than contrasting what a President said vs. what the Congress he faced would do.)
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