And the very real damage done across the board to the fabric of discourse make him a divisive individual to back. Unfortunately, the US may pay the price for his brand of narcissistic, corrupt ineptitude longer than they have enjoyed the marginal benefits of his term.
By Tariq Carrimjee
(Financial consultant and Emerging market specialist)
The Trump presidency will be remembered forever- that much is sure.
Whether it carries on for another term or it ends in the November election itself still remains to be seen and will depend- as it usually does, on whether the American public feels that his performance has been up to the task or not. What will be unusual this time will be the amount of sheer disinformation, outright lies, spin and sheer acrimony out there to parse through to get to the kernel of truth.
For liberals who believe in altruism, cooperation, inclusivity, global order and progressive social agendas the last four years have been the most harrowing, chilling and enraging time. For the supporters of the right-wing agenda which he has espoused- one of muscular assertion, America first, evangelical, deal-driven, rugged self-determinism with minimal regulation and oversight his Presidency has been a godsend- almost messianic.
Trump’s brand is built on bombast, hyperbole, spin, bulldozing regulations and opposition and his presidency has projected it as being centred around an authoritative Executive Branch with a compliant Legislative and Judicial wing that follows his bidding or furthers his agenda. All of this is polemical, and volumes will be written about all the multitude of ways that he has subverted norms (to add to the volumes already written).
Let us look at the economic changes that have occurred during the last four years and what effect his interventions have had.
Despite his oft repeated claims of adding millions of jobs at an accelerated pace to a cratered economy this is the first bit of bombast that can be easily refuted. As a candidate Trump had promised 25 million jobs over 10 years. But that was no mean target given that the US had been growing at an average of 2.45 million jobs a year for the last 5 years of Obama’s presidency. In fact, Trump’s presidency from 2017-2019 created jobs at a lower trajectory (165 thousand per month) than earlier but continued the extended run of job growth begun under the first term of Obama. There was a shift towards manufacturing, construction, mining and logging and away from the service sector industries that had underpinned US job growth for the previous period. It is the rate of job growth that marks the efficiency of policy and- in this regard, we see that there was no discernible positive difference made at all in this main benchmark of his economic performance.
Obama had brought the unemployment rate down from over 10% in the space of his 8 years to 4.7%. Trump had managed to bring that down to 3.5% in 3 years before the epidemic hit which temporarily sent it above 13%. The record job losses this year cannot be attributed to the economic policies of the President, but the lagging pace of recovery can be attributed to the botched quarantine/ lockdown policies put in place to retard the spread of the pandemic.
And it has been a complete disaster in that regard with policy implementation bordering on criminal neglect. This will eventually determine the overall tally in this parameter, and it will not be flattering.
The signature policy measure that Trump managed to have legislated was the tax cuts of 2017. Whilst not the largest one ever- as he claimed, by any means it did prove strict adherence to the belief of “trickle-down” with the majority of gains being made by the upper brackets and businesses (down from a rate of 35% to 21%). It did not provide any significant stimulus to growth through investment but did manage to turbo-charge the trend
of share buy-backs through released funds. This was the booster that sent the share market soaring until the start of this year despite no corresponding growth in financials from sales or productivity gains.
The downside of the tax cuts was the unintended increase in the US budget deficit and overall debt. Despite promises that he would bring down the national debt it has gone in the other direction and increased consistently even before the USD 2.3 trillion stimulus package announced earlier this year.
Note that the deficit in 2010-12 was to tackle the biggest financial crisis to hit the world for many decades.
The growth of the deficits would have been justified if- as was promised on the label, they paid for themselves as the economy grew at a faster trajectory. But it was projected by the Tax foundation to reduce annual revenues by an average of USD 180 billion per year for a decade.
But, at least on the matter of growth we have seen some more consistency in the growth columns even though there has been no breakaway climb and has been largely stuck in the 2-3% band. Much of this can be attributed to the deregulation of protections afforded to the environment and consumers. This may yet have longer-term negative consequences but has been the rock on which Trump has touted his economic credentials.
Whatever positivity is to be found in the current administration is to be found in the economic sphere and- as we can see, that really isn’t half as miraculous or outstanding as Trump makes it out to be; a lot of it is just smoke and mirrors.
The real effects to the United States may be longer term in nature. There can be little doubt that he is singularly unable to rise to the level of a statesman. He has consistently proved himself to be too much of a shady New York real estate developer to lead America on the global stage. He has been dismissive of multilateral agreements and alliances, cosied up to dictators and given them legitimacy and singlehandedly undermined the middle east peace process. All of this has forced the world to turn away from US leadership. This may not return given the rise of China and Russia to fill the vacuum created. Even the EU is turning away from the US - at least as long as Trump is President. US hegemony lends it a soft power too and that soft power translates into a premium on valuations of US assets from Treasuries to equity to intellectual property rights, it gives the US currency seigniorage, it works in trade negotiations and the export of its values and gives the US a pre-eminence in other ways which is harder to quantify. That is evaporating fast. The trade war with China has produced no tangible benefit and led to higher prices, subsidy bailouts to farmers and the threat of escalation into a conflict. The re-branding of NAFTA to the USMCA- just ratified by the three counterparties, is just that: an exercise in re-branding.
As a side note: the actions against China aren’t just a mercantilist response to a one-sided trade relationship. They are the actions of a hawkish wing of American politics which sees China as a genuine threat to its hegemony and is looking to restore its dominance by reducing China to a trade supplier and removing any notions of aspirations of regional dominance. The US would like to maintain its pre-eminence in Asia even as it withdrew from the Trans-Pacific Partnership which was designed to curb Chinese influence. In this regard, the Trump administration has a clear geo-political goal but has botched up the execution.
Ultimately Trump faces a credibility crisis: with someone who has such a pathological need to lie (clocked at 20,000 falsehoods during his term thus far), it is difficult to believe him- especially when he makes claims that are at complete odds with reality. His brand of ‘magical thinking’, compulsive positivity, divisiveness, denial of responsibility and spreading blame make him a difficult person to trust. Making outlandish claims that have no basis in reality make him a poor candidate to believe. And the very real damage done across the board to the fabric of discourse make him a divisive individual to back. Unfortunately, the US may pay the price for his brand of narcissistic, corrupt ineptitude longer than they have enjoyed the marginal benefits of his term.
Tariq Carrimjee is Bombay born and raised, US-educated, and has 25 years of experience in the banking & financial services industries. Now based in Dubai, Tariq runs a successful business, advising clients on investment opportunities in emerging markets.
With Trump's term coming to an end and as the whole world along with Americans wait to see who the Americans will choose as their new leader. The author here is looking into how Trump’s government has fared with policy changes and other implementations.