◼ ECONOMICS Bloomberg Businessweek February 10, 202029ILLUSTRATION
BY
SCOTT
GELBER.
DATA:
U.S.
BUREAU
OF
ECONOMIC
ANALYSIS,
U.S.
TREASURY;
*AVERAGE
DURING
ECONOMY
EXPANSION,
Q3
2009
TO
Q4
2016
bypasstheHouse.Republicanshadjustseized
controlthere,ledbymembersoftheTeaParty
movementwhoopposednewgovernmentspend-
ing.Thelistthegroupcameupwithwas“uncom-
fortablyshort,”herecalls.
BarackObamawona secondtermin 2012 any-
way,andif theeconomyis a guide(itoftenbutnot
alwaysis),thenTrumpis wellplacedtofollowsuit.
Hegetsgoodratingsontheeconomy,andhe’scam-
paigningonunemploymentbeingnearall-timelows
andstockpricesatall-timehighs.Still,economists
reckongrossdomesticproductwillexpandata 1.8%
pacethroughthefirstthreequartersof2020.That
wouldbeslowerthanthesameperiodin2019—and
not much different than 2016, when elections didn’t
go well for the incumbent party.
The Trump administration’s use of deficit spend-
ing a decade into an expansion has been unortho-
dox. Some analysts have warned it could leave the
government short of budget firepower in the event
of a recession—and drive inflation and interest rates
higher. Those threats haven’t materialized yet, and
economists are coming around to the idea that the
U.S. has room to spend.
Trump has also added tariffs to the toolkit. He’s
shown that a president can run trade policy almost
single-handedly, and since the escalation with China
was largely of his doing, he can probably control tim-
ing when it comes to de-escalation.
U.S. business has put some investment on hold
because of the trade war, so trade peace would likely
boost the economy—but that may not happen before
the election. Most analysts haven’t upped their
forecasts for U.S. growth this year as a result of the
“phase one” deal signed with China last month.
Even so, a follow-up before November could help
Trump’s reelection campaign, says Brian Riedl, a
senior fellow at the Manhattan Institute: “The more
the president can show he’s moving toward a resolu-
tion on trade, that will help him in the battleground
states and make the case for a second term.”
On fiscal policy, too, Trump may have reached
the point where he can offer promises for a sec-
ond term rather than action in his first. His admin-
istration has been dangling the prospect of more
tax cuts—especially for the middle class—ever
since pushing the last round, which favored the
wealthy, through Congress late in 2017. Last month
at Davos, Treasury Secretary Steven Mnuchin said a
“Tax 2.0” proposal may be unveiled within months.
Congressional Republicans hope to campaign on the
plan to regain control of the legislature. The GOP
would need to pick up about 20 seats in November
to regain a majority. Most political analysts think
it’s unlikely the party can win that many races,especiallywithseverallong-standingRepublican
lawmakersretiring.
Evenjustthereleaseoftaxplanscouldliftthe
stockmarket,andthatinturncouldboostconsumer
confidence,accordingtoKylePomerleau,a resident
fellowattheAmericanEnterpriseInstitute.That’s
whathappenedafterTrump’selection,hesays,and
“youcouldimagineit happeningagain.”
A $2trillionoverhaulofU.S.infrastructureis
anotherfiscalstimulusthat’sbeentoutedsince
Trump’sfirstdaysinoffice.A cross-partydealin
Congressprovedelusivethenandwouldbetougher
inanelectionyear—andevenif it happened,onlythe
mostshovel-readyofprojectscouldgetunderway
beforevoting.
If therewasa levertomovethedollar,Trump
wouldsurelypullit.Thepresidentoftencom-
plainsthatthestronggreenbackis hurtingman-
ufacturers.Hehasn’tcomeupwitha mechanism
forweakeningit,beyondtweetinghisdispleasure
attheFed,thoughtheCommerceDepartment
isweighingtariffsoncountriesseenasunfairly
manipulatingtheircurrencies.
Thereis onewild-cardideathatTrumpcould
potentiallyexecuteonhisown—oneborrowedfrom
Democraticrivals.SenatorsBernieSanders(I-Vt.)
andElizabethWarren(D-Mass.)proposetowrite
offmostorallofthe$1.6trillioninstudentdebt.
Trumphasprivatelyexpressedconcernsthathe
doesn’thavea plantocounterthemandaskedaides
tocomeupwithonethatwilllowercostsforstudent
loanborrowers,theWallStreetJournalreported.
Forgivingthedebtswouldboosttheeconomy
likea taxcut,Moody’sInvestorsServicesays.
A RooseveltInstitutestudyreleasedinDecember
explainedhowit couldbedonewithoutCongress.
Theideahasa populistflavorthatmightappealto
Trump.Butthereareplentyofobstacles,includ-
inglikelylegalchallengesandhostilityfromsome
Republicanvoters.
Trumphasothertoolsunderhisdirectcontrol,
includingexecutiveordersandpolicyatthefederal
agenciesrunbyhisappointees.TheFederalHousing
Authoritycouldloosencreditrequirementsfor
homebuyers,forexample,ortheU.S.Department
ofLaborcouldmakemoreworkerseligibleforover-
timepay.It’sjustthatthosetoolsaresmall-borecom-
paredwithcutsininterestrates—orintaxes.“You
hearTrumpyellingatJayPowelleverywakinghour
becausehisammunitionis prettymuchtapped,”
Bernsteinsays.“Hecan’tgobacktothefiscalwell.”
�LauraDavisonandBenHollandTHE BOTTOM LINE Trump can make promises about what he’d
do in a second term, but his tools for boosting the economy before
November are limited.Under
Obama*Under
Trump▼ Average quarter-
over-quarter GDP
growthduring
expansionperiod
Government
contribution-0.1%2.2%0.3%2.6%