10 Leaders The EconomistOctober 17th 2020
2 They should speak up, too. China’s regime is not impervious to
shame. If it were proud of its harsh actions in Xinjiang, it would
not try to hide them. Nor would it lean on smaller countries to
sign statements endorsing its policies there. As the scale of the
horror emerges, its propaganda has grown less effective: 15 ma-
jority-Muslim countries that had signed such statements have
changed their mind. China’s image has grown darker in many
countries in recent years, polls suggest: 86% of Japanese and 85%
of Swedes now have an unfavourable view of the country. For a
government that seeks to project soft power, this is a worry.Some say the West would lose too much by lecturing about
human rights—China won’t change, and the acrimony will sty-
mie talks about trade, pandemics and climate change. True,
keeping human rights separate from such things is impossible,
and China will try to convince other countries that moral can-
dour will cause them economic harm. Nonetheless, liberal de-
mocracies have an obligation to call a gulag a gulag. In an age of
growing global competition, that is what makes them different.
If they fail to stand up for liberal values they should not be sur-
prised if others do not respect them, either. 7P
resident donald trump says Americans should re-elect
him because of his record on the economy. Before covid-19,
America enjoyed its lowest unemployment rate in 50 years, fast
annual wage growth of almost 5% among the lowest-paid work-
ers and a buoyant stockmarket. Mr Trump attributes all this to
his three-pronged strategy of tax cuts, deregulation and confron-
tational trade policy, and says more of the same will revive the
economy after the pandemic. Many voters agree. The economy is
one issue where Mr Trump does not face a big deficit in the polls.
Yet his administration’s economic record from before the
pandemic is mixed. It got one thing right: when Mr Trump took
office the economy was still in need of stimulus, which tax cuts
and more spending helped provide. But that success has also
helped conceal the damage done by his protectionism.
Trumponomics has not achieved what its proponents fore-
cast. While campaigning in 2016 Mr Trump predicted economic
growth of 4% or more; in office the target was cut to 3%. Between
the start of 2017 and the end of 2019 America
grew by an annual average of 2.5%, barely faster
than the 2.4% growth of the three preceding
years. The Trump administration argued that
tax cuts would pay for themselves and that cut-
ting red tape for business would spur invest-
ment. In reality the budget deficit rose from
4.4% to 6.3% of gdp, on the imf’s measure, and
although deregulation did help boost business
confidence there was no sustained jump in investment growth.
Both regulatory and tax reform have reined in some bad poli-
cies, such as trimming tax deductions for mortgage interest and
state and local taxes. But improvements like this are, relative to
the size of the economy, small. In the three years to 2019 the ad-
ministration says that it eliminated $51bn of regulatory costs,
which is only about 0.2% of one year’s gdpand ignores any pub-
lic benefits from regulation. Most estimates suggest the long-
term boost to growth from Mr Trump’s tax reform will be about a
tenth of a percentage point per year or less.
What was exceptional about America’s pre-pandemic econ-
omy was not, therefore, its supply side, nor even its jobs boom,
which was replicated across the rich world. It was that as global
economic growth slowed sharply in 2018 and 2019, America’s
growth fell only relatively gently (see United States section).
That was because it was temporarily propped up by a bigger bud-
get deficit. Mr Trump can take some satisfaction from his pump-priming. In 2017 many economists argued that it was a bad time
for stimulus because the economy and the labour market had
reached their limits; in 2018 the Federal Reserve, coming to a
similar judgment, raised interest rates four times. It turned out
that there was still plenty of slack. As a result the fiscal splurge
caused faster growth than seen elsewhere in the rich world with-
out provoking much inflation. Interest rates came down again,
making public debt more affordable.
The irony is that a crude stimulus to growth might not have
been necessary were it not for Mr Trump’s trade war and tariffs,
which hurt confidence and weighed on global growth. Before the
pandemic the imf estimated that the fight between America and
China might wipe nearly 1% off global output. America offset this
drag, rather than escaping it altogether. Recent research suggests
that Mr Trump’s tariffs destroyed more American manufactur-
ing jobs than they created, by making imported parts more ex-
pensive and prompting other countries to retaliate by targeting
American goods. Manufacturing employment
barely grew in 2019. At the same time tariffs are
pushing up consumer prices by perhaps 0.5%,
enough to reduce average real household in-
come by nearly $1,300.
Taken together, the various strands of
Trumponomics offer three lessons. First, there
are big benefits to running the economy hot and
keeping the job market tight, particularly for
poor workers. Policy should be aimed at restoring these condi-
tions as quickly as possible after the pandemic. If that means
running large deficits while interest rates are low, so be it (al-
though given the parlous state of America’s infrastructure, the
money would be better spent on growth-boosting investments
than on regressive tax cuts). Second, in already deregulated
economies supply-side reforms may not always show up much
in gdp growth. That does not make them undesirable—it is good
to eliminate tax breaks—but it does mean politicians should not
make wild promises about growth, which is weighed down by
immutable forces such as the population ageing. The third les-
son is that tariffs are usually a self-defeating way to promote
manufacturing, and harm growth and consumers.
In 2019 Mr Trump presided over the best labour-market con-
ditions America had seen in several decades. He deserves some
of the credit. Despite that, he is overselling Trumponomics. It
was both a help and a hindrance. 7Grading Trumponomics
How to judge the president’s economic recordThe American electionGDP
%increaseona yearearlier
3
2
1
0
2016 17 18 19Rest of G7, weighted averageUnited States