Photo Credit: swisseconomic/Flickr Creative Commons
Donald Trump believes in fairy tales. We’re already familiar with his favorites, like the Bowling Green Massacre and winning the popular vote, but as Paul Krugman points out in his Monday column, our next waking nightmare may be Trumponomics: Reagan era fantasies, back from the dead to convince America that growth through low taxes and cuts to government spending will benefit anyone other than millionaires.
The Trump administration believes the American economy will see 3-3.5% growth over a decade. The Congressional Budget Office and the Federal Reserve have other, lower ideas, but why would a president, or Paul Ryan for that matter, listen to respected, bipartisan institutions when there is Social Security to slash? Didn’t we have 3.4% growth during the Reagan years?
Not so fast, Krugman writes. The number may be true, but, consider the context: “baby boomers were still entering the work force. Now they’re on their way out, and the rise in the working-age population has slowed to a crawl. This demographic shift alone should, other things being equal, subtract around a percentage point from U.S. growth.” Plus, as Krugman continues, growth was even higher during the Clinton years, at 3.7%. Why was this the case? Turns out inheriting weak economies was a factor:
Reagan and Clinton inherited depressed economies, with unemployment well over 7 percent. This meant that there was a lot of economic slack, allowing rapid growth as the unemployed went back to work. Today, by contrast, unemployment is under 5 percent, and other indicators suggest an economy close to full employment. This leaves much less scope for rapid growth.
Plus, Clinton actually raised taxes on the rich, and America had unprecedented growth and prosperity. So did Obama. What the right fails to mention, as they questioned his citizenship and blocked his Supreme Court picks, is that Obama presided over “much more rapid private-sector job growth than George W. Bush, even if you leave out the 2008 collapse. Furthermore, Krugman continues, “two Obama policies that the right totally hated – the 2013 hike in tax rates on the rich, and the 2014 implementation of the Affordable Care Act – produced no slowdown at all in job creation.”
The only way we’d see the growth Trump is looking for, would be “a huge takeoff in productivity — output per worker-hour. This could, of course, happen: maybe driverless flying cars will arrive en masse. But it’s hardly something one should assume for a baseline projection.”
Even if Trump were to continue his trademark economic strategy of bullying companies into keeping a small fraction of their jobs in the US, as with the Carrier plant, it would be a mere drop in the bucket. There’s no guarantee they’d make air conditioners any faster.
This magical economic thinking may have found its worst host in our current president, but Krugman rightly reminds us that this has been a cornerstone of Republican thought for decades. He explains, “belief that tax cuts and deregulation will reliably produce awesome growth isn’t unique to the Trump-Putin administration. We heard the same thing from Jeb Bush (who?); we hear it from congressional Republicans like Paul Ryan. The question is why. After all, there is nothing — nothing at all — in the historical record to justify this arrogance.”
The evidence, Krugman rightly hammers home, “is totally at odds with claims that tax-cutting and deregulation are economic wonder drugs.” It is however, great for billionaires, and it’s time for the rest of America to stop: “on such matters Donald Trump is really no worse than the rest of his party. Unfortunately, he’s also no better.”