Liberals don’t seem to understand the Trump economy, and I think this may have devastating political consequences for them. The first thing that liberals need to admit is that there really is a “Trump Economy.” Liberals need to admit, as we close in on the 2018 midterm elections, that the economy is humming. 3.9% unemployment is nothing to sneer at. Stating that the economy is not as strong as the number suggest may be technically accurate, but it makes Democrats look out of touch.. Remember in the waning day so of the 2008 election, as the economy seemed to crumble around us, when John McCain said that “the fundamentals of the economy are strong”? Remember that? That should be a cautionary tale for Democrats. McCain was technically correct. Even with 10% unemployment, 90% of the working age population were employed, consumers were buying, trucks were rolling along the interstate delivering goods. But the economy clearly was struggling, and McCain’s technically correct statement made him look like an out of touch idiot, and may have contributed to his electoral defeat. Democrats now risk sounding just as out of touch.
So let’s talk about the Trump economy. Let’s talk about 3.9% unemployment, record corporate profits, and record highs for the stock market. These are obviously not the sole measure of economic success: there are troubling signs with wage stagnation, growth is widely uneven, certain regions enjoy steady growth while others languish, and most of the growth has gone to the 1%. But it is equally true that the economy is humming.
So why is the economy doing so well? The first reason is that the American economy and the world economy, have been on an upward trend since about 2009, as they recovered from the Great Recession. This is due, in part, to some of the policies put in place during the Obama Administration, but it’s also due to growth in emerging markets, and policies put in place by China, the world’s second largest economy. So Trump inherited a strong economy and has, to date, not screwed it up. (He might with things like tariffs and trade wars, but for now we’re good.) Democrats understand this, and often give this as the sole explanation for the strength of the economy. But to be honest they need to admit that there are other reasons.
The second reason the economy is doing well are the tax cuts. They were not “middle class” tax cuts as Trump and every Republican running in the mid-terms likes to claim, but there is no doubt that pumping billions of dollars into the economy has had an effect. It’s like squirting lighter fluid on a campfire. It is simple Keynesian economics. Pumping money into the economy in any way will give it a jolt. Whether it is sustainable or not, or whether the resulting growth in government deficits has an impact down the road or not is another matter, but the immediate impact is undeniable.
The third component is “regulatory reform.” The specific real-world impact of this is debatable because it takes time to roll back specific regulations and in many cases regulated industries can’t quickly change practices. But what this has done is to unleash what economists call “the animal spirits” of the market. Many business owners feel that they’ve been given the green light to grow, advance, and innovate. (We’ve seen that this kind of deregulation can backfire – as in the S & L crisis that followed the deregulation of the S & L industry, and the banking collapse in 2008 that followed the banking deregulation of the Bush years.) But there is no doubt that many business owners don’t like to be told what to do, and like the idea of an administration loosening the reigns. Statistically, of course, the economy does better with a Democrat in the White House, and with Democrats in control of Congress, because policies that favor workers puts more money in worker’s pockets, which they spend and which stimulates the economy. But in the modern world of partisan news, facts like this don’t spread very far.
The final but perhaps most important component is consumer confidence. I heard a woman at a Trump rally say that it seemed like the economy started to improve the day after Trump was elected. It didn’t, of course (see point 1 above) but what did change the day after Trump was elected, and certainly the day after he took office, was the way that conservative media talked about the economy. Throughout the Obama years, Fox News and conservative talk radio downplayed the strength of the economy. That changed with the election of Trump. This can be seen in consumer confidence numbers. While Obama was president the numbers were lower because most conservatives believed what they were told on Fox News, and thought the economy was struggling. So when they were polled they said they were not confident about the economy. Once Trump was elected their confidence went up. Liberals were more confident during the Obama years, but their confidence didn’t decline much after Trump’s election because they were looking at real data, and not simply listening to what certain broadcasters were saying. So consumer confidence jumped after Trump was elected. The lady was right.
Consumer confidence is a very important for the strength of the economy. When consumers are confident they make purchase, they change jobs, and some open businesses. High consumer confidence correlates directly with economic activity, and because conservatives are now confident (since their guy is in the White House) they’re buying, and the economy is improving.
It should be clear that very little of this has much to do with Trump’s actual policies, and each of these policies is fraught with danger. The tax cuts have ballooned the deficit, which could have devastating consequences down the road. Deregulation could lead to the kind of financial crisis created by deregulating banks and S & L’s in the past. And Trump’s bluster could lead us into a trade war that we can’t easily get out of, with devastating consequences to trade worldwide.
I realize that Democrats want to highlight the problems to taint Trump and the Republicans. But I think there’s a real danger that they’ll come across as sounding “out of touch,” and that could hurt them in swing districts.
So I think that liberals in general, and Democrats in particular, need to address these economic issues rationally. Acknowledge the good news and give Trump some credit. This will the critiques sound far more rational.
But here’s the other thing that liberals need to understand about the Trump economy. In the modern world of simplistic partisan spin, good economic news is attributed to other elements of the Trump agenda.
Family separation? If harsh immigration policies give us 3.9% unemployment, then crack down harder. Trump said immigrants are taking jobs from Americans. He cracked down on immigration, and unemployment is now down to record lows. If A, then B. Seems pretty clear. No rational economist would say that the two are related, but no rational economist works at Fox News or has a three hour radio program on Clear Channel Communications. We don’t live in the world of rational political debate. We live in America. Rational political debate left long ago. In the modern world family separation equals 3.9% unemployment.
This crack-pot logic applies across the board to everything that Trump does. The answer to every question about Trump’s policies or programs is that it must be working because we have 3.9% unemployment. Deregulation? 3.9% unemployment, so yeah, deregulate the hell out of that sucker.
It doesn’t matter what the issue is, what the question is, the answer is always the same. Bizarre tweets? Demeaning comments toward women? Extremist judges? 3.9% unemployment.
What Democrats need to understand is that even those people who are not Trump supports see 3.9% unemployment and are willing to cut Trump some slack.
So until Democrats can rationally address 3.9% unemployment, their arguments on these other issues are all for naught.