President Donald Trump is a populist, a mix of conservative and liberal, and while the conservative side of him is already making the economy sparkle, the liberal side threatens its future.
The heartening jobs data – 235,000 new ways for Americans to earn a living – was accompanied by a slight fall in unemployment rates and a slight budge in wages. The report indicates business expansion, a consequence at least in part of consumer confidence that’s the highest in 15 years.
The stock increases don’t just make the rich richer, as some commentators sometimes seem to suggest, but boost the wealth of average Americans. Something like half of us have stock investments.
The source of no small part of this economic ebullience is President Trump, not so much what he has already done – some of it significant – but what he is expected to do. He is, for instance, figuring on lowering corporate taxes to rates more or less in line with the reasonableness of the rest of the world, thus making American executives bolder and our major corporations more competitive.
Trump is also figuring on financial repatriation – bringing back foreign-earned assets by American companies at tax rates less than murderous – and that could reward us with $2.5 trillion. Other promises of tax cuts for individuals will free them to spend more, and we know from the past what long-term, macroeconomic dividends can result.
Additionally, Trump and the Republican Congress figure on reducing our grotesque regulatory afflictions to something that allows widespread prosperity, and Trump has already moved in that direction.
All of this adds up to conservatism, although the plotted infrastructure project is no such thing unless ways are found to pay for it other than budgetary decimation. Trump does in fact aim to trim the budget here and there and is finding ways at this very moment to reduce the number of federal employees. But he has still other spending plans – not least of them what he wants to do for the military – and promises he won’t touch entitlements, which is to say, get ready for a big-time crisis down the road.
Liberals have long said Social Security or Medicare readjustments would amount to human punishment. The worst punishment would be to do nothing. Entitlements already make up 60 percent of our budget, baby boomers have not quit retiring and the Congressional Budget Office is among other nonpartisan, analytically equipped entities saying crisis could well await if nothing is done. This is no small matter. This could be economic devastation of the terminator kind, and, by the way, Trump’s trade protectionism is another liberal trick that could cause economic shriveling.
There is a possibility the conservative side could still best the liberal side of a populism aiming to indulge multimillions with pleasing policies even if some result in unpleasing outcomes. Trump’s rightist inclinations could result in a growth rate of 3.5 percent, conceivably even 4 percent, some say. If we got there, the extra revenue, even at reduced tax rates, would take care of the extra spending on entitlements and more. The debt issue might go away.
Many say it cannot happen because of built-in inhibitors, including a reduced workforce and too few of the kinds of technological changes that make economies bounce. Others disagree, saying that the planned pro-growth reforms will unleash something the likes of which will make everyone cheer.
It’s hard to know, but keep your seatbelt on.