Trump 45 Was an Actual Economic Success That Cannot Be Repeated for Trump 47
Donald Trump’s re-election was entirely the result of the very good economy from 2017 to 2019. Perhaps because the deficit spending was the result of large tax cuts for the wealthy and increased military spending, and perhaps (fairly) because he’s a fascist buffoon, liberals don’t want to credit Trump for the success of economic growth in that time period, but it’s worth acknowledging at the very least that it was very successful for the bottom half of the income spectrum, and was more or less for the right reasons.
After the Great Recession, America was plagued with insufficient demand, and lived in a ZIRP world. We never got the prolonged deficit spending and zero interest policy that was required to help achieve liftoff, in part, because the market assumed that monetary policy would get “responsible” too soon. Donald Trump did not care, he wanted cheap money no matter what, and complained about interest rates rising even after the Tax Cuts and Jobs Act blew a hole in the deficit. It was precisely because he and his Fed chair did not seem to fear inflation running over two percent - that the United States truly approached full employment in 2019.
And to be clear, it’s what we had. The prime age employment rate hit 80.6 in January 2020, the highest it had been since 2001. Real median household income surged, real weekly earnings for Black Americans surged, and the gap between Black and White unemployment shrunk for the entirety of his term, a true change from Republicans of the past. In crude terms, the Misery Index, a sum of unemployment and inflation, hovered near all time lows for the majority of the term, right up until March 2020.
Donald Trump delivered, pre-COVID, what the economy needed, cheap money and a big deficit, and the economy benefited. And in COVID, with the help of Democrats, the United States delivered the largest fiscal response to the crisis in the world, such that for most unemployed Americans during the pandemic, the net result was little economic pain and many people saw their mortgage payments lowered and locked in to never before seen levels. It’s worth remembering that even as he lost the election, Donald Trump held a 13% advantage over Joe Biden on who Americans trusted to handle the economy:
The economy was not the most salient issue in that election, COVID and Donald Trump’s personality were, and so Democrats won. In 2024, the economy was the most salient issue in the election, Democrats presided over a horrible bout of inflation, and Donald Trump won. Donald Trump, the businessman who presided over America’s best economic run in terms of real median income in decades, has power because Americans believed his hype and they had proof that he had actually delivered.
But if the idea of Donald Trump as a man who delivers for the economy and the median American falters, his power goes with it. Right now, tech, Wall Street, and swing voters all believe in him to continue delivering on the growth of Trump 1, but without it, his second term may look a lot more like Bush 2: a lame duck President whose swashbuckling disregard for American institutions comes home to roost and Republicans start to bail, knowing he is soon to be without power.
And the reason to think he’ll fail is the same reason he succeeded the first time: in 2017, the American economy needed irrational deficit spending and cheap money. This time, the American economy needs sane and sober stewardship. The forward price to earnings ratio of the S&P 500 is already high, there’s little room for multiple expansion. America is already at full employment and the hiring rate is extremely slow. Interest rates are quite high. Right now it’s the consumer and AI-related market fervor keeping the American economy going. But the uncertainty and irrationality of the first Trump term was in certain ways a boon to the economy.
Not so much today. Hiring seems maxed out and flows from unemployment into employment are weak. Housing, which until recently, was the business cycle, is weak. Whether or not Trump follows through on tariffs seems secondary to whether he seems tethered to the market’s reaction to what he does anymore. Whatever Elon Musk’s goons are doing in the Executive leaves open the possibility that vast sums of money will be sucked out of the American economy at any time. I’m loathe to bet against the American consumer, and as long as asset prices and a strong job market are supporting consumption, a recession is not here. But if those start to weaken and the consumer pulls back, it’s unlikely the idea of Donald Trump the genius economic steward can survive.