Trump’s biggest economic legacy isn’t about the numbers

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To understand how much President Donald Trump has altered the conversation around the economy, just listen to Bruce Haines, who spent decades as an executive at US Steel before becoming a managing partner of the elegant Historic Hotel Bethlehem.

The steel mills that still dominate the skyline of Bethlehem, Pennsylvania, have long been empty. And now so are the tables in the Tap Room, the hotel's restaurant, a sign of the economic hardship caused by the coronavirus pandemic. "It's been very difficult," Haines said.

Whether they love or hate him, many business owners across the US plan on voting for Donald Trump.Credit:AP

The president's management of the pandemic is a prime reason many voters cite for backing his opponent. But Haines, who lives in a swing county in a swing state, is struck most by a different aspect of Trump's record.

"I spent 35 years in the steel business, and I can tell you unfair trade deals were done by Republicans and Democrats," Haines said. Both parties, he complained, had given up on manufacturing — once a wellspring of stable middle-class jobs. "Trump has been the saviour of American industry. He got it. He's the only one."

In perhaps the greatest reversal of fortune of the Trump presidency, a microscopically tiny virus upended the outsize economic legacy that Trump had planned to run on for reelection. Instead of record-low unemployment rates, supercharged confidence levels and broad-based gains in personal income, Trump will end his term with rising poverty, wounded growth and a higher jobless rate than when he took office.

Still, despite one of the worst years in recent American history, the issue on which Trump gets his highest approval ratings remains the economy. It points to the resilience of his reputation as a savvy businessman and hard-nosed negotiator. And it is evidence that his most enduring economic legacy may not rest in any statistical almanac but in how much he has shifted the conversation around the economy.

Long before Trump appeared on the political stage, powerful forces were reshaping the economy and inciting deep-rooted anxieties about secure middle-income jobs and America's economic preeminence in the world. Trump recognised, stoked and channelled those currents in ways that are likely to persist whether he wins or loses the election.

By ignoring economic and political orthodoxies, he at times successfully married seemingly contradictory or inconsistent positions to win over both hardcore capitalists and the working class. There would be large tax breaks and deregulation for business owners and investors, and trade protection and aid for manufacturers, miners and farmers.

In the process, he scrambled party positions on key issues like immigration and globalisation and helped topple sacred verities about government debt. He took a Republican Party that preached free trade, low spending and debt reduction and transformed it into one that picked trade wars even with allies, ran up record-level peacetime deficits and shielded critical social programs from cuts.

"He completely moved the Republican Party away from reducing Social Security and Medicare spending," said Michael Strain, an economist at the conservative American Enterprise Institute.

On immigration, Trump remade the political landscape in a different way. He has accused immigrants of stealing jobs or committing crimes and — as he did in Thursday night's debate — continued to disparage their intelligence. In doing so, he rallied hard-line sentiments that could be found in each party and turned them into a mostly Republican cri de coeur.

Even voters who don't particularly like Trump credit him with re-energising the US economy.

The Democrats changed in turn. Former Vice President Joe Biden has positioned himself as the champion of immigrants, pledging to reverse Trump's most restrictive policies, while rejecting more radical proposals like eliminating the Immigration and Customs Enforcement agency.

He has also been pushed to finesse his position on fracking and the oil industry, promising not to ban the controversial drilling method on private lands and trying — with mixed success — to walk back comments he had made during the presidential debate about transitioning away from fossil fuels.

Shifts on trade were more momentous. Biden and other party leaders who had once promoted the benefits of globalisation found themselves playing defence against a Republican who outflanked them on issues like industrial flight and foreign competition. They responded by embracing elements of protectionism that they had previously abandoned.

Despite one of the worst years in recent American history, the issue on which President Donald Trump gets his highest approval ratings remains the economy, pointing to the resilience of his reputation as a savvy businessman and hard-nosed negotiator. Credit:Mark Makela/The New York Times

No matter who spends the next four years in the White House, economic policy is likely to pay more attention to US jobs and industries threatened by China and other foreign competition and less attention to worries about deficits caused by government efforts to stimulate the economy.

The manufacturing sector still represents a relatively small slice of the economy, accounting for 11 per cent of the country's total output and employing less than 9 per cent of American workers. But Trump has been a relentless cheerleader. While he often took credit for manufacturing jobs at companies like General Motors and Foxconn that later disappeared or never materialised, the pace of hiring in the sector sped up considerably in 2018 before stalling out last year.

As a result, in this election, unlike the last, the significance of manufacturing and the need for a more sceptical approach to free trade are not contested.

Biden, after decades of supporting trade pacts, is now running on a "made in all of America" program that promises to "use full power of the federal government to bolster American industrial and technological strength." He has also vowed to use the tax code to encourage businesses to keep or create jobs on US soil.

Even voters who don't particularly like Trump credit him with re-energising the US economy.

Walter Dealtrey Jr., who runs a tyre service, sales and retreading business in Bethlehem that his father started 65 years ago, said he voted for Trump in 2016, but he was never a big fan of the president.

"He talks too much," said Dealtrey, who's been around long enough to distinguish a new Goodyear or Michelin tyre by its smell. "And his tone is terrible." A year ago, he had considered the possibility of supporting a moderate Democrat like Biden or Senator Amy Klobuchar of Minnesota.

But with Election Day just over a week away, Dealtrey plans to once again support the president. Even after a few unnervingly slow months in the spring and some layoffs among the 960 people he employed at his company, Service Tire Truck Centers, he still trusts Trump on the economy.

Dealtrey talked as he walked around stacks of giant tires that towered above his own 6-foot frame, a Stonehenge-size monument to wheeled transport. He likes the president's focus on "big manufacturing" and the way he "instills confidence in businesses to invest in this country."

“Trump has been the saviour of American industry. He got it. He’s the only one.”: Business owner Bruce Haines.Credit:Hannah Yoon/ The New York Times

Just how much responsibility Trump deserves for reframing some key economic issues is up for debate. Frustration about job losses in the United States has been brewing for decades; the parties were diverging on immigration; and antagonism toward China over trade practices, suspicions of technology theft and its authoritarian tactics extends beyond the United States.

"I don't think he really has pushed the boundaries of any of those policy issues beyond where they already were," said Strain of the American Enterprise Institute.

Similarly, Jason Furman, a chair of the Council of Economic Advisers during the Obama administration, argues that Trump was pushed along by the same trends and forces that spurred his supporters. And on some issues, like immigration, he caused public opinion to move in the opposite direction.

In the end, it may turn out that the president's most significant impact on economic policy is not one that he intended: overturning the conventional wisdom about the impact of government deficits.

By simultaneously pursuing steep tax cuts for businesses and wealthy individuals, raising military spending and ruling out Medicare and Social Security reductions, Trump presided over unprecedented trillion-dollar deficits. Emergency pandemic relief added to the bill. Such sums were supposed to cause interest rates and inflation to spike and crowd out private investment. They didn't.

"Trump has done a lot to legitimise deficit spending," Furman said.

Furman is one of a growing circle of economists and bankers who have called for Washington to let go of its debt obsession. Investing in infrastructure, health care, education and job creation are worth borrowing for, they argue, particularly in an era of low interest rates.

That doesn't mean the issue has disappeared. Republicans will undoubtedly oppose deficits resulting from proposals put forward by a Democratic White House — and vice versa. But warnings about the calamitous consequences of federal borrowing are unlikely to have the same resonance as before the Trump presidency.

The New York Times

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