Macroscope | Trump’s policies are setting up the US economy for a fall, but would a Democratic president be any better?

The Fed’s loose monetary setting is propping up a stock market rally and low job numbers cannot hide the middling GDP growth rate

The US needs a policy correction, and Trump, who has overseen ballooning budget and trade deficits, is not the right person for the job

Reading Time:3 minutes

Suits are displayed in the window of a store on Madison Avenue in New York on February 17. Rebalancing US growth towards investment and exports and tempering America’s consumer-driven economy is long overdue. Photo: Bloomberg

Published: 3:00am, 25 Feb 2020Updated: 4:09am, 25 Feb 2020

The US Democrats’ 2020 election hopes seem in disarray, with recent impeachment proceedings against Donald Trump backfiring, potentially gifting the US president another four years in the White House.

Trump is bouncing back in the opinion polls, claiming success on the economy and the stock market’s stellar performance. The US jobs market is booming and equities have certainly notched up record highs, yet Trump’s record on growth is less impressive.

The economy would have done a lot better without Trump waging an unnecessary trade war with China. He’s also failed to bring home jobs and productive capacity, long lost abroad after years of past policy mismanagement. What’s needed now is new leadership, with a bold vision to make significant changes. Whether Trump can change tack or a Democratic rival can make a difference remains to be seen.

US growth has been below par for a quite a while. Since Trump moved into the White House in 2017, growth has only managed to average 2.5 per cent in the past three years, below the 3.2 per cent long-term trend for the US economy in the post-war period.

The economy may be enjoying its longest cycle of unbroken growth, but it’s only thanks to unremitting monetary support from the Federal Reserve since the 2008 financial crisis and more recently from Trump’s 2017 tax cuts.

With the global economy now facing new challenges from the coronavirus threat, new policy initiatives are needed once again. Fortunately for Trump, luck might be on his side. If the virus is contained soon, it might give a temporary lift to growth later this year, providing Trump with an extra tailwind going into the November presidential election.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x

.css-1m2rp1p{color:#34b8b5;}Macroscope | Trump’s policies are setting up the US economy for a fall, but would a Democratic president be any better?

Macroscope | Trump’s policies are setting up the US economy for a fall, but would a Democratic president be any better?