If you were trying to damage a weak economy, you might follow this script:
~ Threaten punitive tariffs on imports, since protectionism caused havoc during the Great Depression.
~ Create uncertainty in big sectors such as healthcare, by upending government programs that help set business strategy.
~ Pull out of global agreements, against the advice of the nation’s top business leaders.
~ Pursue policies meant to protect the jobs and technologies of the past rather than the future.
~ Generate ongoing scandal that imperils the US presidency.
President Trump, of course, has done all of these things, to varying degrees—yet consumer confidence is high, hiring is strong and financial markets are buoyant. In our latest Trumponomics Report Card, Yahoo Finance gives Trump a grade of B+ on the economy, which means the economy is stronger right now than it was under most of Trump’s White House predecessors during their first terms, going back to the 1970s.
Trump critics have blasted our B+ grade, arguing that he hasn’t been in office long enough to influence the economy, and is enjoying tailwinds generated during President Obama’s final years in office. We acknowledge that, though it’s also true that Trump’s proposals to cut taxes and slash regulation have helped boost business confidence, since they ought to fatten corporate profits—if they ever come to pass.
But Trump has also done a number of things—intentionally, or not—that would harm profits and employment if the economy weren’t coasting along. The Republican plan to pull the plug on Obamacare, without explaining what would happen next, has left dozens of insurers and millions of consumers unsure about federal policies in 2018 that could make or break corporate and family budgets. One reason insurers such as Anthem are leaving the program is the inability to predict federal reimbursements in 2018, which directly affect profitability. And that decision is Trump’s alone to make, with no involvement by Congress required.
Most businesses dislike Trump’s promise to remake trade arrangements with China, Canada, Mexico and other trading partners, because they’ve invested heavily in global supply chains based on the way things are, not the way they might be under this or that new policy. Trump’s fans want him to tear up the international status quo, even if it disrupts business and impedes hiring. Trump is talking the talk they want to hear.
In some cases, he’s walking the walk, too, including his unilateral decision to withdraw from the Paris climate agreement earlier this month. That move won’t harm US business interests as much as some people claim—but it won’t do much to help, either. Trump ditched Paris as a sop to old industrial sectors such as coal, which, admittedly, could use a break. But doubling down on fossil fuels risks leaving America shut out of the industries of the future, including renewable energy sources such as wind and solar. The other 190+ countries that remain signatories of the Paris deal may now have an inside track on America, with regard to those technologies.
None of these moves, alone, would necessarily cause economic damage. But if economic growth were shaky or financial markets were in a correction, Trump would be kicking loose pebble after pebble and risking an outright rockslide.
For now, the economy is shaking off all the Trump debris, including the ever-deepening probe into all things Russia. And markets still hold out some hope of tax cuts, deregulation and infrastructure spending, although the odds of that seem to dim by the day. “Everyone asks us: ‘Why the hell does the market continue to rise with this horror show in Washington?’” analyst Gregg Valliere of Horizon Investments wrote to clients recently. “We explain that it’s largely about earnings, the economy, and a pro-business climate inside the Beltway. We’re not ready for a correction yet, the fundamentals are simply too good.”
The fundamentals will turn south sooner or later, which might produce the market correction Valliere refers to. But it might also force some sobriety on Trump and his fellow china-breakers in the White House, and persuade them to handle the economy a little more delicately. There may come a time when Team Trump has no choice.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman