Letter to the Editor: Trump mismanaged economy during his term

The Alliance Review

To the Editor:

According to polls, 46% of Americans approve of the way Trump has handled the economy. People seem to believe that since jobs grew and their 401k accounts rose, Trump must have done a good job.  As a conservative, a Republican and a student of economics for over 40 years, I submit that Trump has mismanaged the economy and sown significant long-term risks into our economic outlook. The principle drivers of the economy during Trump’s tenure have been deficit spending, low interest rates, a widening trade deficit, and the pandemic. 

The largest factor that stimulated the pre-pandemic economy was a $1.5 trillion tax cut.  While most of us enjoy more money in our pockets, our pre-pandemic deficits doubled to over $1 trillion per year. Trump’s tax cuts provided a huge party for the American people with $1 trillion per year of borrowed money, and people have cheered him since.  Any fool can throw a huge party with $1 trillion per year of borrowed money, but that debt will have to be repaid. Trump’s attempt to win accolades has left our children and grandchildren with a very large bill to pay.

A second problem with the tax cuts is they exacerbated income and wealth inequality.  83% of the tax cuts went to the top 1% income earners. Given that all of us will be responsible for paying for the debt incurred, and cuts in education and health services were used to offset some of the tax cuts, the cuts, in effect, took from the poor and gave to the rich. Income inequality is now at the highest level since just prior to the great depression.

The second driver of growth has been short-term interest rates engineered by the Federal Reserve, not the Trump Administration. These rates fostered borrowing for housing, autos and education, and created trillions of dollars of wealth through housing and stock price appreciation. Asset price increases made people feel wealthier, spend more and boosted growth. However, the Federal Reserve’s pumping $3 trillion dollars into the economy also pushed down CD yields and drove stock prices up to precariously high valuations. 

While Trump would like us to believe his trade negotiations boosted the economy, that simply isn’t true. Our trade deficit with China went from $347 billion in 2016 to $346 billion in 2019.  To maintain support for this, Trump gave US farmers $28 billion in additional subsidies, and US consumers had to pay $34 billion more for purchases.  

Furthermore, Trump’s abandonment of the TPP trade deal seriously damaged our ability to counter China’s economic and military expansion. We had joined with eleven allies to counter China’s aggression, but Trump unwittingly threw away our strongest hand. Given that military might and security are derivative of economic might, the consequences could not be more profound.  

Trump’s tough trade dealings with other countries haven’t been fruitful either.  In 2017, our total trade deficit was $550 billion; last year it was $617 billion. Clearly, Trump threatening leaders of other countries has been counterproductive.

Trump’s mishandling of the pandemic has also done tremendous damage to the economy.  Trump’s downplaying of the virus and refusal to encourage people to wear masks allowed the virus to spread and resulted in personal and economic loss and pain that is incalculable.  In the second quarter GDP contracted 32%, or $2.1 trillion.  51 million jobs were lost, and even after the job gains of the last few months, we still have 3.9 million fewer jobs than when Trump was inaugurated.

For those who still believe Trump has and will be a good steward of our economy, I hope the facts above give you reason to reconsider. While many had hoped Trump would use his business acumen to propel the economy forward at a faster pace, the tragic reality is that he has not only brought great economic hardship upon us, but dug us into a hole that will take years to dig out of and damaged our position on the world stage.

George Zadigian