James Carville achieved media fame when speaking for the Bill Clinton campaign in 1992, he snarled, “It’s the economy, stupid.” President-elect Trump’s slogan of “Make America Great Again,” echoes that sentiment. With the presidency of Donald Trump about to begin, considering what the likely future course of the economy might be is appropriate.
When Barack Obama took office in 2008, a worldwide Greatest Depression was imminent. The American economy had tanked, the American automobile industry was on the brink of extinction, and unemployment was soaring to what would become a high of over 10%. Although Obama had considerable political capital and a Congress controlled by Democrats, his response to the crisis was extremely tempered.
Obama’s recovery strategy was to continue the stimulus approach out-going President Bush had begun to implement. Federal loans and other support went to institutions judged “too big to fail” while enterprises not in that category had to fend for themselves. Obama also provided massive federal assistance to the auto industry. Not aided were citizens with foreclosed homes and left undone was the task of rebuilding the nation’s decaying infrastructure.
Over the course of two Obama administrations, those institutions judged too big to fail got even bigger and more powerful, and a revived auto industry regained its status as an economic powerhouse. Economic growth reached 2.5% heading for 4% in 2017 with no inflation of note. Unemployment fell to under 5% while the Dow Jones Average rose to an all-time high of nearly $20,000, a sensational improvement from its low of $7,000.
Obama forged a laudable record on environmental protection. He prohibited oil drilling on public land, off shore, and in the Artic. Responding to mass protests, he finally rejected the Keystone Pipeline. He also gave substantial support to the solar power industry now at the cutting edge of a technology that has created a large and rapidly increasing work force.
On the negative side of the ledger, Obama fought fiercely for the Trans-Pacific Trade Agreement, even though it had even more faults than NAFTA. Wages have remained stagnant and no executives responsible for illegal policies that ultimately trigged the Great Recession have been prosecuted.
The best indication of where Trump is heading is that he has filled his administration with veterans of Wall Street behemoths such as Goldman Sachs, ExxonMobil, and Dow Chemical. Whether these individuals use their considerable skills on behalf of the public or the economic elite from which they come remains to be seen.
Trump has promised to cut corporate taxes, to simplify the tax code, to ease or lift regulations on business imposed after the Great Recession, to bargain better international trade agreements, and to arrange for billions of overseas corporate dollars to come home for domestic investment. These promises have ignited a boom on Wall Street as investors believe it prefigures a substantial pro-business climate. Economists who base their views on the outcome of previous massive deregulation of big business warn the boom could end in yet another disastrous burst bubble.
Trump’s pledge to rebuild the national infrastructure is good news for the nation, and especially good news for workers and investors in manufacturing giants such as Caterpillar and Deere. A large Republican faction, however, opposes this kind of federal spending. Whether Trump can prevail over their objections is not clear.
The President-elect has surprised many with his hard-boiled critique of gargantuan military boondoggles such as the F-35 fighter program. If this becomes a serious goal and not just a media sideshow, Trump will achieve a reform memorably suggested by President Eisenhower over fifty years ago. Trump’s assault on wasteful military spending, however, does not square with his pledge to increase the budget for the world’s most powerful military force. That American military budget already is larger than budgets of the next four powers combined.
In contrast to Obama, Trump wants to place foxes in the environmental and energy hen houses. Rick Perry, his proposed Secretary of Energy, advocates using more coal rather than less and he believes in drilling for oil wherever it can be found. In his own presidential bid, Perry promised to abolish the department he will now head.
Scott Pruitt the proposed head of the Environmental Protection Agency repeatedly sued the EPA to loosen regulations on fracking while he was Attorney General of Oklahoma . During Pruitt’s time in office, fracking became a pillar of Oklahoma’s economy, and a state that had had almost no earthquakes, now has one every day.
Pruitt has opined that “global warming is a hoax.” He opposes the historic Paris agreement to reduce greenhouse gases and other human byproducts that affect the climate. The Paris agreement signed by the United States and almost 200 other nations, including China, India, and Russia, was possible only after years of negotiations.
Obama has been a cautious president using traditional means to rebuild an economy inherited in shambles. The new president is far less traditional, a temperament apparent in his choices to head key federal agencies. How Trump actually governs once he moves from campaign rhetoric to presidential action will become evident in the first hundred days of his administration. Two years from now, Americans will pass judgment on Trumponomics based on results rather than promises.