Gordon L. Weil
Donald Trump is making the same mistake as Joe Biden. And, like Biden (and then Kamala Harris), he
may pay the price.
He sees the national economic data as showing prosperity and
believes he should reap a political reward for having made it happen.
It’s true that for both national job creation data was good,
inflation was being reduced from Covid levels, and wages were beginning to
increase. The stock market, which is supposed to embody the prospects for the
future economy, climbed.
Biden and Trump had sharply different ways of keeping their
versions of the good times rolling.
Biden relied on traditional Democratic “pump priming” to
restore the post-pandemic economy. Added
to that, he tried to boost income support programs. These measures required government spending,
but Biden saw national recovery emerging.
His support for greater government involvement in the economy led Trump to
call him a radical socialist.
But Trump has turned out to like big government as well. His unprecedented tariff moves are aimed to
promote domestic manufacturing. He has
made the government a direct corporate investor. He pushes the national debt to new records by
big spending on the military and border security.
Both have believed that their actions promote a strong
economy and cite the national statistics to prove their point. They both have erred in believing that good
national numbers translate into prosperity for all individuals. Implicitly, they argue that national success
will trickle down to working people.
That’s an old theory that has never worked.
Both missed that many middle-income and poor families are
struggling to pay for food, clothing and shelter. A favorable national economy does not spread
itself to all people.
This has been due partly to what people see as
inflation. They cannot keep up with
rising prices, even if they receive modest pay increases. Inflation was artificially low before the pandemic,
and the Federal Reserve has successfully lowered it, but not fully to pre-Covid
levels. The long effort to restore a balanced,
normal economy has led to problems for personal budgets.
Biden used government outlays to meet those problems, but
they often missed the mark. Trump sees
great promise through the creation of manufacturing jobs, but that takes time
and meanwhile, families struggle. He
also cuts federal benefit programs, compounding the effect as less federal money
flows into the economy.
Trump sees the readings he gets from the stock market as a
measure of economic health. Yet the
market reflects speculation, these days on AI, as well as short-term profitability.
Some see Trump’s prosperity, real or promised, as being like
the U.S. during the 1920s. Business and
the stock market soared. The privileged few enjoyed lives of excess. The government stepped back. It couldn’t last and finally, there was an
economic price to pay.
The well-regarded monthly survey of consumer sentiment is a useful
measure of how average people see the economy.
Right now, it is at a near-record low with only about half of the people
being optimistic about the economic outlook.
Consumers are cutting down on discretionary spending.
The erratic course of Trump’s policy moves makes it
difficult to forecast the economic outlook and it generates a sense of instability,
which undermines chances for sustained growth.
A major cause of the disconnect between apparent national
prosperity and the economic life of most Americans is the gap between the wealthy
and average people. With only a small
segment of the population owning a commanding share of the nation’s wealth, views
on the state of the national economy are skewed.
Average families don’t have to understand economics. They can see the income gap.
The East Wing of the White House is abruptly demolished to
build a huge, lavish ballroom. It is
financed by some of the wealthiest Americans, many of whom gain profitable favors
from the Trump administration. At the
same time, Trump withholds food stamps.
Elon Musk, whose mythical Department of Government
Efficiency devastated government agencies, induces his Tesla investors to agree
to pay him $1 trillion.
These actions don’t involve the direct expenditure of public
funds. But they send a readily
understandable message about the two Americas – the wealthy and everybody else.
Trump promises voters that the economy will be working well
for them, as it does for the wealthiest, by the time of next year’s congressional
elections. He strongarms the Federal
Reserve to lower interest rates even faster to aid that effort, risking greater
inflation.
He is an experienced sales person. He asserts that the economy is booming, not
because he truly believes it, but to imply that better times are on the
way. Biden learned that the people pay
more attention to their current expenses than to national statistics or campaign
promises. Trump seems not to have learned
from Biden’s hard-earned lesson.
