A Light Switch Is Flicked from Off to On
“Under Trump, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States.”
—Former Clinton and Obama chief economist Larry Summers, June 20161
“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never . . . so we are very probably looking at a global recession, with no end in sight.”
—Paul Krugman of the New York Times, the day after the 2016 election2
“A President Trump Could Destroy the World Economy”
—Title of a Washington Post editorial, October 20163
In early 2018, Donald Trump did something highly unexpected. With the U.S. economy now booming again, he flew to Switzerland and spoke at the Davos World Economic Forum, a conference of elite world leaders, CEOs, and self-important government bureaucrats. This was not a friendly crowd of well-wishers donning Make America Great Again hats. Trump had shunned this group in 2017—most everyone in the audience had been brutally against him—but now he had a story to tout to the buttoned-down policy audience. His message was brief and crisp: “Ladies and gentlemen . . . America is open for business again.”
This world-class salesman was selling America to the gathered CEOs. Bring your business and your jobs to our shores. We will make you a deal you can’t refuse. One commentator summarized his speech aptly by saying that “Donald Trump is a one-man Chamber of Commerce for America.”
Whatever criticisms might be directed at Donald Trump eighteen months into his presidency—and there are admittedly plenty of missteps and misstatements—what we can say with certainty is that the NeverTrumpers were fantastically wrong about him and Trumponomics.
No, he hasn’t “destroyed the world economy.”
No, the stock market hasn’t crashed.
No, there is no recession.
Those who foolishly believed these predictions by the deep thinkers of the left, and then foolishly acted on them, lost a whole lot of money. One person who was a big-time loser was that economic sage, documentary producer Michael Moore (no relation to Steve), who announced to the world that when Donald Trump was elected: “I sold all my stocks.” Whoops! He sold with the Dow Jones at 18,000 and a year and a half later it was near 25,000—up a mere 39 percent. You’re supposed to buy low and sell high, Michael.
Our point here is not to be triumphalist. At the time of this writing, July 2018, the economy is firing on all cylinders and is as healthy as it has been in 20 years. But we know from decades of experience that the economy is fickle and can turn on a dime, due to a multitude of factors, not least of which would be a trade war. Even more topsy-turvy is the stock market. So it is premature less than two years into his presidency to declare Donald Trump an economic savior. Ask us at the end of his second term about that.
But from our standpoint, having served as economic advisors to Trump and as part of a team of people who helped devise the strategy, so far Trumponomics is working. It is working so well that even we are amazed at the American economic transformation—both at the speed and the heights of the rebound.
Trump was elected to reverse a generation of economic stagnation and middle-class anxiety. He has already nearly doubled America’s growth rate from 1.5 percent to just under 3 percent in the last quarter of 2017. And unlike Reagan, who rescued the economy from a deep and dreary recession, Trump is confronting a massive resistance movement from the other party. Reagan could at least count on some Democrats and the labor unions to support his fight against Moscow and his reengineering of the economy through tax cuts, sound money, and deregulations.
Trump is a more politically isolated figure, and yet his list of policy victories is impressive:
One point of this book is that quite apart from the discrete policy victories—and perhaps even more important—is the X factor at the heart of the Trumponomics agenda. Donald Trump is unequivocally pro-business. In so many ways for the employers, investors, and workers of America, that has made all the difference.
Consider, for example, the explosion of consumer confidence, the stock market climb, and the small business optimism rebound in the days following Trump’s unexpected election. The election was like an injection of performance-enhancing drugs into the veins of the economy, and the results were instantaneous and felt coast to coast.
One of Steve’s favorite reminiscences from Trump’s first year in office was meeting the owner of a car repair shop outside Cleveland, Ohio. “How is business, Jimmy?” Steve asked. “Steve, to be honest, it was like a light switch was flicked from off to on the day after the election, and since then I’ve had more customers than my business can handle.”
Jimmy is not alone in his bright-eyed assessment. The month before the 2016 election, the rating of the economy and jobs market was about 30 percent positive. In 2018 that number had soared to its highest level in 20 years, with 70 percent rating the American economy as “good or great.”4
The key to appreciating Trump’s economic accomplishments is to put aside for a moment your personal opinion of Donald Trump’s words and actions in office. Forty percent of voters have consistently disapproved of Trump’s behavior. Just judge Trump on his objective results.
The Dow’s stock market rally since Election Day means over a $6 trillion rise in wealth. That has benefited the rich, yes, but also every one of the 100 million Americans who own stocks in 401(k) plans, IRAs, and pension plans. Investors are capitalizing the lower business tax rates and lower toll of regulation into higher stock valuations.
The job market impressively improved under Barack Obama’s presidency following the Great Recession, when more than 8 million jobs vanished overnight. But the 2017 and 2018 decline in joblessness has been impressive as well. In April 2018 the unemployment rate hit its lowest level in nearly 50 years, and the black and Hispanic unemployment rates hit their lowest levels in almost 40 years. There are some 6 million more jobs in America than skilled workers to fill them.
All this was punctuated by the cascade of corporate announcements of more jobs, higher pay, and a torrent of new investment in America within one month of the Trump tax cut. Apple’s glorious announcement of $300 billion coming back to America, with 20,000 jobs, a new business “campus,” and $38 billion of tax payments to the Treasury, is just the kind of response we hoped for from the lower corporate tax rate and low repatriation tax.
Fiat Chrysler is moving an auto factory to Michigan with 2,500 jobs. After decades of outsourcing jobs from America, we are now seeing firms insource jobs. Walmart and Costco have both raised their starting hourly wages, which could affect more than 1 million workers. (Does Nancy Pelosi want to take back her charge that the Trump tax cut would cause Armageddon?)
In 2018 small business profits hit their highest level—ever. The Washington Post reported that in some areas of the country, blue-collar workers are earning $25,000 bonuses. Who do they think they are? Kevin Durant?
We loved the front-page headline in the Wall Street Journal in June 2018, “Economic Growth in the U.S. Leaves World Behind.”5 As the rest of the world’s economies, including Europe, Japan, and China, lose steam, America is again the driver of global growth.
Something is going radically right here.
Trump’s critics assured us that all of this was impossible; Paul Krugman dismissively snuffed that Trump’s projection of 3-plus-percent growth was as likely as “driverless flying cars arriving en masse.” Then when the speed-up in growth actually occurred, the Trump critics shifted to say that the growth rate they thought was impossible—even though they had predicted it would surely happen under Obama, but it never did—was now presumably a delayed reaction to Obama policies. It was a deeply convoluted logic, and especially unpersuasive given that so much of what Trump has done policy-wise on the economy has been to undo what Obama had put in place.
For those who want a full account of the Trump economic successes, we recommend the book The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It by our friend and colleague Andy Puzder.
In the end, we think the Wall Street Journal, which has hardly been kind to Trump since the day he announced for president, put it pretty well: “The only good thing about Donald Trump is all his policies.”6