An A- for the U.S. Economy, but Failing Grades for Trump’s Policies

An A- for the U.S. Economy, but Failing Grades for Trump’s Policies

Mr. Trump might argue that the point of the tax cut wasn’t to provide a short-term stimulus, but rather to promote long-term economic growth. However, economists say that it will fail to do that, too. In a survey before the bill was passed, all but one expert said the tax cut wouldn’t lead gross domestic product “to be substantially higher a decade from now.” Darrell Duffie, the lone dissenter, said it would boost growth, but he added that “whether the overall tax plan is distributionally fair is another matter.”

The problem, according to Daron Acemoglu, a prominent macroeconomist, is that while “simplification of the tax code could be beneficial,” that effect would most likely be “more than offset by its highly regressive nature.” Recent data support this pessimism, as the much-promised investment boom the tax cut was supposed to deliver appears not to have materialized.

It is worth noting that the one part of Mr. Trump’s platform that received a strong endorsement from economists — his promise of infrastructure spending — has languished, despite the possibility of bipartisan support.

For a president, monetary policy should be simple: Appoint good people, and let the Federal Reserve do its job. Mr. Trump has got half of this right. Jerome Powell, his pick for Fed chairman, has so far proven to be adept. In a recent survey, 43 percent of economists gave Mr. Powell’s leadership an A, and 51 percent gave him a B (with the remaining 6 percent giving him a C). Mr. Trump’s other Fed appointments have been mainstream, yielding a cast of policymakers that Jeb Bush might have appointed had he been elected president.

But Mr. Trump has dragged down his grade in this category by meddling in ways that have needlessly complicated the Fed’s job. Most industrialized countries, including the United States, have generally insulated monetary policy from political pressure, believing that such independence helps policymakers deliver low and stable inflation. Yet Mr. Trump has repeatedly criticized Mr. Powell for not setting interest rates lower, and has reportedly raised the possibility of firing him. The president is playing a self-defeating game, because he is making it harder for Mr. Powell to deliver low rates without appearing to have been bullied by Mr. Trump.

Mr. Trump isn’t just pushing against one or two threads of economic consensus. Instead, his program is an almost complete repudiation of the orthodoxies endorsed by Democratic and Republican economists.

Put the pieces together, and all of this presents a puzzle: If economic policy is so bad, why is the economy doing so well?

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