Columns
THE PUBLIC EYE:Trump and the Economy
600 days before the 2020 presidential election, it looks like the two major issues will be Donald Trump and the U.S. economy. Of course, this could change if Trump leaves office or there is a cataclysmic climate event. Otherwise, the election will be determined by voters' feelings about Trump and, of course, how they view their economic prospects.
The latest polls ( https://projects.
That's a remarkably widespread sentiment. A recent Gallup poll (https://news.gallup.com/poll/
In 2020, will the U.S. economy help or hurt Trump? To answer this question we should examine Trump's economic campaign promises.
Jobs: During the 2016 presidential campaign, Trump promised to create 25 million jobs over 10 years and to double economic growth to 4%. According to Factcheck (https://www.factcheck.org/
An October CNBC report (https://www.cnbc.com/2018/06/
While there has been an increase in jobs, most Americans have not seen an increase in wages. Since Trump became President, wage growth has been tepid. (https://www.motherjones.com/
Trump promised that economic growth would be at least 4 percent. So far, Gross Domestic Product has reached this mark in only 1 of 8 quarters. GDP growth was 3.4 percent in the third quarter of 2018 and 2.6 percent in the fourth quarter. On February 26th, Federal Reserve Board Chairman Jerome Powell told the Senate Banking Committee the Fed, "[Expects] the U.S. economy to grow solidly but at a slower pace this year than the estimated 3 percent growth for 2018." Some economists have suggested that in 2020 the U.S. economy will be stagnant.
Prediction for 2020: The economy will slow, fewer jobs will be added, and wages will be static.
Taxes: During the campaign, Trump promised massive tax cuts: "Everybody is getting a tax cut, especially the middle class." He did push through tax legislation but it favored the rich at the expense of everyone else. The most recent Gallup Poll found that 52 percent of respondents disapproved of the way Trump has handled taxes.
Trump promised to cut the corporate tax rate to 15 percent; his "Tax Cut and Jobs Act" cut the corporate rate to 21 percent. (By the way, under Trump, corporate profits have increased by 14 percent.)
The net effect of Trump's tax plan has been to reduce federal income by $1.5 trillion per year. This produced an increase in the national debt.
Debt: Trump promised to bring down the national debt: "We’ve got to get rid of the $19 trillion in debt. ... Well, I would say over a period of eight years." Instead, the national debt has grown to $22 billion (https://www.usatoday.com/
Not everyone feels that the growing national debt is a problem; certainly not the Republican Party, which -- when Obama was President -- moaned about the national debt but, under Trump, has gone silent on the subject. Nonetheless, Fed Chairman Powell is concerned; he told the Senate Banking Committee: "Federal government debt is on an unsustainable path... I think that U.S. debt is fairly high as a level of (gross domestic product) and, much more importantly than that, it’s growing faster than GDP.”
A growing national debt is likely to produce an increase in interest rates. It's also going to affect Congressional appetite for big federal public-sector initiatives such as massive investment in infrastructure. (During the campaign, Trump promised: "to invest $550 billion to ensure we can export our goods and move our people faster and safer.")
Prediction for 2020: As the economy slows, the increasing national debt will affect interest rates, dragging down growth.
Trade: During the 2016 campaign, Trump portrayed himself as a master dealmaker who would revitalize existing trade relationships. Trump's promised to renegotiate trade deals such as NAFTA. He's done this but with uncertain results (NAFTA was replaced by USMCA -- the US Mexico Canada Agreement -- which has yet to be ratified.)
Trump also promised to to raise tariffs on imports; particularly those from China. He's done this.
Despite Trump's efforts, the U.S. trade deficit has increased by more than 20 percent. On March 6th, the Commerce Department reported that the trade deficit was the largest on record: $891 billion. (Including a $419 billion trade deficit with China.)
Prediction for 2020: While the trade issue has an uncertain impact on the overall economy, it does affect public perception of Trump's leadership. The latest Gallup Poll indicates that 50 percent of respondents now disapprove of Trump's handling of trade.
Summary: Heading into the 202 election, Donald Trump is asking his supporters to trust him, in general, and to believe in his economic leadership. While some will continue to trust him with the passion of religious zealots, others will falter; they will react to a slowing economy and a cluster of negative economic trends. Trump's political base will erode.
Bob Burnett is a Berkeley writer and activist. He can be reached at bburnett@sonic.net