How can Trump benefit from an economy that is unsatisfactory for Americans?

Table of Contents

• 1 The importance of political and economic stability
• 2 Lessons from the Clinton era
• 3 Economic Stability in the Trump Era
• 4 Challenges facing Trump
  • 4.1 summary
• 5 How ​can historical lessons from past ⁢presidencies inform President Trump’s approach to​ economic challenges in his second⁢ term?

The newly elected US President has died Donald Trump The past few months have revealed the American economy as a major disaster that calls for radical action. This strategy has been politically successful, but it has challenged Trump to deliver on bold promises to reform the economy, at a time when non-interference may be the best option. .

Of course, the American economy is not a disaster, but it is the focus of the world’s attention right now, especially since the unemployment rate is low, and …Inflation declines, real wages rise, and productivity continues to grow. However, the majority of American voters feel dissatisfied, with the effects of the wave of inflation that swept the country in 2021 and 2022, the stagnation of the housing market, the slowdown in employment, partisan polarization, and a lack of awareness of global economic statistics.

The memory of the wave of inflation is expected to fade over time, and Trump will not be blamed anyway. They also have discounts Interest rates which he follows Federal Reserve Board This will help restore home sales and employment momentum. There may not be enough time to achieve the desired improvement.

The importance of political and economic stability

Another argument for “less is more” is that political stability and policy predictability are supportive of the economy. For this reason, Wall Street tends to favor partisan gridlock in Washington, and the rule of law promotes economic growth.

In 2016, economists Scott Becker, Nicholas Bloom, and Stephen J. Davis, the latter two of whom may be familiar to readers because of their oft-cited research on the job revolution, developed -from home published by the pandemic, an index published by the pandemic. measured economic policy uncertainty based on media coverage, and found that political uncertainty is associated with greater volatility in stock prices, and a decrease in investment and employment in policy-sensitive sectors such as defence, healthcare, finance and infrastructure. At the macro level, increased political uncertainty reflects a decline in investment, production and employment.

New data was later added to the table, including information on expired tax provisions and various economists’ expectations. The index showed a significant increase in uncertainty at the start of the Covid-19 pandemic, before seeing a downward trend since then.

Lessons from the Clinton era

The experience of President Bill Clinton, especially in the last three quarters of his term, provides an important historical lesson about the benefits of reducing political uncertainty. After the failure of his attempt to reform the comprehensive health care system, and the results of the 1994 elections that gave Republicans control of Congress for the first time in 42 years, Clinton was forced to change his intentions. reduce the domestic politics. But this recession led to an economic boom, and he achieved the highest approval ratings for a president in his second term (according to records dating back to the Harry Truman era).

One reason for this increase was increased productivity fueled by technological innovations in Silicon Valley. With recent developments in the field of artificial intelligence, there may be a similar economic boom in the coming years.

Economic Stability in the Trump Era

Trump is preparing to start his second term with several factors automatically contributing to the reduction of economic uncertainty. Debt ceiling crises, which caused a steady increase in the economic policy uncertainty index in the 2000s, often occur with a Democratic president and a Republican-controlled House of Representatives. Therefore, such a crisis is likely to be minor, even if the Democrats manage to gain a majority in the House of Representatives.

In addition, Republicans tend to stop ruling, regardless of its long-term effects, which is a frustration of short-term uncertainty. In light of Trump’s election and the prospect of a Republican majority in Congress, voters appear to be promising to extend the provisions of the Tax Cuts and Jobs Act of 2017, which was supposed to expire next a year

Challenges facing Trump

I understand that the chances of Trump sticking to a policy of non-intervention are very slim, if not non-existent. Presidents usually try to make good on their campaign promises, and Trump, in turn, promised massive immigration deportations, a sharp increase in tariffs, a package of tax cuts , and a challenge to the independence of the Federal Reserve. Together, these policies are likely to slow economic growth while contributing to inflation, fiscal deficits, and economic uncertainty. Trump’s election victory is likely to make it difficult for the Federal Reserve to move forward with policies to lower interest rates.

However, the current economic situation is still favorable enough for economic growth to continue despite all these interventions. I don’t expect a disaster, and I understand how important it is that the president seems to be taking steps to improve conditions, especially because of voter dissatisfaction with economic situation. But Trump has exceptional communication skills, which allow him to convince his supporters that he is taking decisive action, even if he does nothing at all. At the current level, this is probably the most appropriate approach to economic policy.