I disagree with the general sentiment that the Trump Administration is good for economic growth. While certain economic policies might be mildly positive, these are overwhelmed by negative economic and social policies, and by Trump’s disdain for democracy.
The Wall Street Journal’s survey of economists neatly sums up the conventional wisdom, concluding that the long-term growth rate of the economy could increase modestly –from 2% to 2.3%– if all of Trump’s agenda were implemented. The policies they focus on include infrastructure spending, rollback of regulations, and tax cuts. Even if we accept that these are the right things to consider, there are problems with the analysis:
- Infrastructure spending, which if done right could provide the biggest boost, is unlikely to be enacted
- Rollback of regulations may speed growth, but eliminating environmental regulations –as Trump has done– causes negative impacts on the environment that GDP doesn’t measure
But beyond this, we need to consider a variety of growth killers:
- Dismantling Obamacare’s progress on universal coverage leads us back to “job lock” –where employees fear leaving their positions to start new businesses because they are worried about whether they or their dependents will be able to get insurance coverage due to pre-existing conditions. I started my business in 2001, well before Obamacare. When prospective entrepreneurs called me for advice, the number one concern about getting started wasn’t about business plans, financing, or hiring, but rather health insurance.
- I put healthcare first (this is the Health Business Blog after all) but reducing immigration is what could really kill the economy. Consider:
- Population growth drives economic growth; reducing net immigration directly slows growth
- Many of the big job creating companies –think Apple, Google, eBay — were founded by immigrants. But we see this on a smaller scale, too. Of the four, fast growing healthcare companies whose boards I serve on, three were founded by immigrants (from Finland, Russia and Tanzania). Immigrants have higher rates of labor force participation and are more likely to start small businesses, too.
- Erecting trade barriers hurts growth. Trade wars have no winners
- There are a variety of non-economic policies and actions taken by Trump that are likely to harm long-term growth. I can’t think of any that help it. For example:
- Undermining the rule of law and attacking democratic institutions such as the courts and Congress, while praising dictators. The US has long been a safe haven in economic and political crises due to its justified reputation for being a nation of laws, not men. Trump is throwing that away and is being abetted by the Republican leadership in Congress
- Adopting harsher policies on incarceration for non-violent drug offenders, which reduces the workforce
- Creating uncertainty on policy by flip flopping dramatically on. It’s hard to plan and invest in those cases
I’m convinced Trump harms growth. If I turn out to be wrong I’ll be the first to admit it.