Trump's Economic Policies, Part I
By David Henderson
We’ve now had over two and a half years of President Donald Trump’s economic policies. While that time is relatively short, it gives us some basis for judging those policies. I judge him in two ways: (1) as a believer in economic freedom and (2) as an economist who cares about people’s economic wellbeing. By those criteria, some of Trump’s policies have been very good indeed and some have been horrid. Specifically, the former have been the 2017 tax cut and his substantial deregulation and holding off on new regulations. The horrid policies have been those on trade, immigration, and federal government spending.
In this essay, I’ll discuss the very good indeed. Part Two, in a fortnight, will focus on the horrid.
These are the opening paragraphs of my article “Trump’s Economic Policies: An Assessment, Part 1,” Defining Ideas, October 17, 2019.
A large part of the piece is on the 2017 tax cut. The longer I’ve had to think about it, along with my own experience with it while doing my 2018 taxes, the more impressed I am by it. And I’m especially impressed by the cut in the corporate income tax rate.
One rough and ready way to estimate the net effect of all of Trump’s economic policies is to compare the growth of real GDP during his time in office with that of Obama.
Obama deserves no blame for the recession that he inherited when he entered office. That recession ended in the second quarter of 2009. Let’s stack the deck slightly in his favor by giving him credit for the growth from the second quarter of 2009 to the first quarter of 2017. I say “in his favor” because during recoveries from recessions, real GDP growth is typically high. From the second quarter of 2009 to the first quarter of 2017, real GDP grew by an annual average of 2.2%.
How about real GDP growth under Trump? He should get little to no credit for growth during the first quarter of 2017 because he was in office for only a little over 2 months of that quarter and his policies had little time to work. So let’s give him credit for real GDP growth between the first quarter of 2017 and second quarter of 2019, the latest quarter for which we have data. During that time, real GDP grew by an annual average of 2.7%, which was half a percentage point higher than the growth rate during Obama’s time in office.
That’s substantial. What makes that 0.5 extra percentage points of annual growth even more striking is that it happened years after the economic recovery occurred, and growth rates well after recoveries tend to fall.
So the good news is that the economic policy issues on which Trump has been “very good indeed” seem to have outweighed the policy issues on which he has been “horrid.”
Read the whole thing.