In the Trump economy, echoes of Hoover and Carter?

Mark Lennihan/AP
Traders at the New York Stock Exchange watch President Donald Trump in a televised White House news conference on March 18, 2020. Mr. Trump has touted tax cuts and tougher tactics toward China and other trading partners as boons for the economy. He has been unable to forge a deal in recent weeks for a new round of pandemic relief for Americans.

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Voters like to broad-brush their presidents’ economic policies: success or failure. While President Donald Trump’s economic projects have rarely, if ever, fulfilled his over-the-top rhetoric, it would be wrong to dismiss them wholesale. 

Pieces of his economic vision are transformative. Take China. While previous administrations prodded Beijing to open up to Western goods and services, Mr. Trump has recast it as a geopolitical rival, quite likely setting a tone for future presidents. 

Why We Wrote This

The pandemic unexpectedly altered the course of the U.S. economy. But has President Trump still put a lasting stamp on it? Sometimes even a mixed track record can mark an inflection point.

Steps such as tariffs open the door for Democrats to employ similar restrictions in their quest for fair trade. Instead of relying on the trickle-down or free-trade philosophies of his predecessors, he has tried to help blue-collar workers directly by boosting manufacturing jobs in the United States. Several of the projects he’s touted have either foundered or been delayed, yet the focus on Americans who don’t have desk jobs may well endure.

Yale University political scientist Stephen Skowronek says Mr. Trump appears to fit a pattern of previous “disjunctive” presidents, such as Herbert Hoover and Jimmy Carter, who came at the end of political eras. They tried but failed to reform their aging political coalitions and instead gave way to the New Deal of Franklin Roosevelt and the Reagan conservative revolution.

Even before he officially took the reins of office, Donald Trump has sought to use his presidency to rebuild hope in blue-collar America.

There were the jobs at the Carrier air-conditioning factory in Indianapolis that, as president-elect, he “saved” from going to Mexico; the huge Foxconn deal in southern Wisconsin – the “eighth wonder of the world,” President Trump called it – that would bring TV manufacturing back to the United States; and U.S. Steel’s $1.5 billion investment in southwestern Pennsylvania that would bring state-of-the-art steel casting back to U.S. shores.

They are shimmering symbols for the president’s vision for a once and now great again America – bright because of the rhetoric Mr. Trump employs, shimmering because the results are, at best, hazy. Has he really changed the economy – and in a way that helps blue-collar workers? 

Why We Wrote This

The pandemic unexpectedly altered the course of the U.S. economy. But has President Trump still put a lasting stamp on it? Sometimes even a mixed track record can mark an inflection point.

All presidents, of course, have limited control over the economy. Global forces and unforeseen events, such as a pandemic, can sink any president’s agenda. And a fractious Congress can stymie new efforts. For several months the economy’s need for new coronavirus relief has gone unmet, partly due to Mr. Trump’s own negotiating tactics but also because of the disconnect between a Democratic-controlled House and Senate Republicans with a distaste for more stimulus packages. 

On Tuesday, Mr. Trump sent stock markets skidding after tweeting that he was ending stimulus discussions with House Democrats, then sent them soaring Wednesday with tweets suggesting a narrower stimulus could still be passed.

This week’s volatility could be an apt symbol of this presidency’s course on the economy. In some ways it may prove transformative – such as in trade relations with China. On other fronts, his efforts may not prove pathbreaking but rather a last gasp of ideas like massive tax cuts, which are now under strain. 

Some policy experts even say his tenure could be one of those rare end-of-an-era presidencies in which a leader has a foot in the past as well as in the future. 

“Part of their genius – and I wouldn’t exclude Trump from this at all – is their understanding that the old established regime has lost control,” says Stephen Skowronek, a Yale political scientist. 

Hoover, Carter ... and Trump?

These presidents break some norms to try to meet new and unanticipated challenges: Herbert Hoover used federal spending to try to stimulate the economy during the Depression; Jimmy Carter started deregulating industries and appointed an inflation-fighter to head the Federal Reserve and fight the era’s stagflation, rather than someone in the New Deal tradition committed to preserving jobs.

Often they are outsiders who tout their non-Washington credentials and unique skills to revitalize increasingly creaky coalitions. But their reforms are too timid because they’re still tied to the old regime, argues Mr. Skowronek, author of a forthcoming book, “Phantoms of a Beleaguered Republic: The Deep State and the Unitary Executive.” 

Just as Hoover heralded the end of post-Civil War laissez-faire Republicanism and Mr. Carter was the last of the New Deal Democrats, so Mr. Trump may well signal the end of the Reagan revolution. These “disjunctive presidents,” as Mr. Skowronek calls them, tend to become failed one-term presidents who give way to transformative presidents who build a new coalition around a set of ideas often foreshadowed by the policies of their predecessors. 

Franklin Roosevelt boosted stimulus spending far beyond what Hoover dreamed; Ronald Reagan made deregulation a central part of his movement to get government off people’s backs.

In the case of President Trump, the failures are visible: The Carrier factory eventually moved some of its production to Mexico and now employs fewer workers than when the president intervened. U.S. Steel has delayed indefinitely its investment in the Mon Valley Works. And the Foxconn project, originally intended to create 13,000 manufacturing jobs, has so far created only about 800 and has been dramatically scaled back to become a technology hub with assembly and packaging operations – hardly the eighth wonder of Wisconsin, let alone the world. 

Yet, it would be a mistake to dismiss his economic vision, economists and historians say. 

The Trump rhetoric hits home with workers that have been passed by by the New Economy. For decades, administrations on both sides of the political spectrum left factory workers in the cold, saying in essence that globalization was here to stay, that their jobs were no longer valuable, and to get the education and training to do something else. If the president hasn’t realized the dream of a U.S. manufacturing revival, he has put their concerns on the map. 

A shift on China

One of the administration’s key achievements, for example, is how it has fundamentally changed Americans’ views on China. While his predecessors viewed it as a country that, with some prodding, would gradually open its economy to Western goods and services, Mr. Trump has recast the vision as a U.S. rival whose ways are incompatible with Western economic practices. To counter it, he has employed punishing tariffs, turning conservative free-trade policies on their head.

“The president has been a game-changer there,” says Douglas Irwin, a trade economist at Dartmouth College. “It will be difficult for any future administration to pull back those tariffs without a major agreement on China.”

In fact, China poses an unprecedented geopolitical challenge to the U.S. – both an economic and national security rival – which presidents will have to grapple with for decades to come, says Iwan Morgan, professor of U.S. studies at University College London.

But a new trade stance toward China, and other manufacturing nations, remains a work in progress. Mr. Trump struggled to reach even a first phase agreement with China while threatening more tariffs against close allies, making it more difficult for him to create a coalition of nations to counter Beijing. 

The president’s tax cuts represent another signature achievement, yet far from a clear win for average workers. Besides cutting individual tax rates, which primarily benefited the wealthy, the 2017 Tax Cuts and Jobs Act also lowered corporate tax rates to globally competitive levels – something previous Republican and Democratic administrations had tried but failed to do.

The tax cuts link Mr. Trump with the supply-side philosophy of President Reagan, yet have added to a U.S. national debt that is now being further expanded by the coronavirus pandemic. 

Millions of workers struggling

And although unemployment for Black Americans fell to historic lows just prior to the pandemic, on other fronts the president has failed to address economic concerns of an increasingly diverse America. 

His 2017 tax law created “opportunity zones” to encourage community development. Yet the zones aren’t creating the many jobs they were intended to, says Jorge González, a research analyst with the Urban Institute.

The pandemic downturn has certainly reversed the gains of racial minorities since 2016. Yet Mr. Trump in July repeated, “I’ve done more for Black Americans than anybody with the possible exception of Abraham Lincoln.”

“It is not only inaccurate, it’s cringeworthy,“ says Darrick Hamilton, a professor of economics and urban policy at the New School in New York. “It’s hard to take President Trump seriously, but it’s also dangerous not to take him seriously.”

In Mr. Hamiltion’s view, African Americans have fared worse under President Trump because his tax cuts have starved federal revenues that could be used for job creation and direct help to households, opportunity zones may lead to gentrification and more inequality, and the wealth gap has continued to widen.

Now the pandemic has widened gaps in the U.S. economy still further, along lines of race, gender, and whether livelihoods are based on in-person services like restaurants or theme parks. Even in coal country, early job gains under the current administration have evaporated. 

Just because President Trump may fit a historical pattern doesn’t mean he’s bound by it, Mr. Skowronek says. He could break the “disjunctive” mold by being reelected. Perhaps more significant, win or lose, history suggests that parts of his economic vision will remain relevant.

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