If there is one thing that supporters (and even many detractors) of President Trump agree on, it’s that he deserves credit for maintaining a strong economy. The current economic expansion is now the longest on record, and the economy continues to generate more jobs, higher incomes and increasing stock values.
Life is good, and Trump deserves the credit — or so we are told.
Virtually all Republicans and even some Democrats are convinced that the strong economy will lead voters to re-elect Trump to the presidency in 2020, despite persistent questions about his character, his understanding of legal and policy issues, his peculiar affection for dictators and his efforts to manipulate the electoral process. Voters will overlook his offensive tweets and his ill-considered decisions in other areas, they tell us, as long as they believe that he will keep the economy humming.
Bill Clinton had it right, they say: “It’s the economy, stupid!”
A careful examination of the data, however, raises serious questions about the strength and balance of the American economy and the wisdom of Trump’s economic policies.
First, it is not at all clear how much credit Trump deserves for the state of the economy and how much belongs to Barack Obama. When Obama and the Democrats took control of Washington in 2008, the economy was in freefall after a series of poor policy choices that began under Clinton and were exacerbated by the massive tax cuts, corporate deregulation and unfunded wars that were promoted by George W. Bush and his fellow Republicans. The result was the economic contraction that we know as the Great Recession.
The economic expansion for which Trump likes to take credit actually began during Obama’s first term as a direct result of economic policies enacted by the Democratic Congress. The economy had been growing at a steady pace for at least six years by the time Trump took office. In fact, monthly job growth under Obama was higher than it has been under Trump.
Second, the massive tax cuts that were enacted in 2017 by Trump and the Republicans have largely failed to produce the promised results. The rate of economic growth did tick upward for a few quarters from the rate at the end of Obama’s presidency, and the unemployment rate has reached record lows, continuing a decline that began under Obama. But the overall boost to the economy has proved to be short-lived, just as most economists predicted. Growth rates for GDP and employment have returned to their levels under Obama, and earnings for major American corporations are actually down by 1.2% in 2019 compared with 2018. Many economists believe that the economy will move into recession in 2020.
In the meantime, relatively little of the money that corporations and wealthy individuals saved in taxes has been invested in new plants and equipment that create new jobs. It also hasn’t been used to increase worker pay as Trump promised. Instead, the bulk of the money has gone to line the pockets of investors and corporate officers through stock buybacks and dividend increases, which economists also predicted.
High earners enjoyed massive increases in income and paid less of it to the government, while ordinary workers received small tax cuts that were more than offset by increased costs for ordinary goods due to Trump’s tariffs. The rich have gotten richer while the working class has been left behind.
Finally — and worst of all — Trump and the Republicans have virtually ensured that the economy will face huge problems in future years by locking in enormous federal budget deficits as far as the eye can see. In the Great Recession of 2008, the deficit ballooned to over a trillion dollars as tax revenues fell (the result of businesses making less money and workers losing their jobs) and government spending increased due to congressional efforts to stimulate the economy and provide for out-of-work Americans. These record-high deficits continued for four years, then commenced a steady decline that continued through the last four years of Obama’s presidency. (Yes, Obama reduced the deficit!)
That progress was reversed by the 2017 Republican tax cuts, which significantly reduced federal income, combined with sizeable increases in military and other spending. The federal budget deficit for 2019 was $984 billion (an increase of 68% since Trump took office) and is predicted to reach $1.1 trillion in 2020 (nearly double what it was in Obama’s last term) and remain there for the foreseeable future. This is the opposite of what should be occurring in a time of economic growth.
As Republicans used to understand, budget deficits have to be financed by government borrowing, which adds to the national debt. Every increase in the national debt means that more of our taxes go to pay the interest on government bonds and less toward programs that benefit present-day taxpayers. Right now these interest payments are less burdensome than in past years because interest rates are unusually low. But when rates go up, which is bound to happen at some point in the future, the amount of tax receipts required to pay interest on government bonds will skyrocket. When that happens, either we or our children will face economic troubles unlike anything that we’ve seen.
Trump will probably be gone by then, but he and his wealthy friends will continue to enjoy the benefits of the massive tax cuts that he and the Republicans gave to people like him while the rest of us struggle to contain the economic mayhem that they unleashed. And if the past is any indication of future behavior, Republicans in Congress will once again call for tax cuts for the rich to address the problem.
There’s only one way for us to avoid this fate: get rid of Trump and the Republicans in 2020 and return to the tax and spending levels that produced budget surpluses during the Clinton years, surpluses that were projected to reach $6 trillion over a decade — far more in today’s dollars.
The American economy can’t stand another four years of Trump’s economic “success story.”
(Dr. Chris Stanley, a theology professor at St. Bonaventure University, earned his undergraduate degree in finance and economics from the University of Virginia and worked for several years doing financial analyses and projections for a privately-held corporation.)