The Economic Policy Failures of the Trump Administration

February 9, 2021

There is some bitter irony embedded in the original campaign 2016 presidential pitch to “Make America Great Again.” One looks around the country to observe catastrophe without precedent. Making sense of all the events that led to this will take years of investigation and reflection. It will require untangling good policies from bad, intentions versus realities, and many layers of causes and effects. My attempt below is not intended to be partisan; it’s an attempt to tell the sad story I saw unfolding before my weary eyes. 

My quick summary: Trumpian economics failed not because of its initial deregulatory push, tax-cut agenda, and judicial appointments. Rather the MAGA agenda failed because of its turn against international trade, its autarkic approach to migration, and, most of all, due to a wildly inconsistent and essentially catastrophic response to the pandemic, all of which trace to a fundamental philosophical pathogen. The post-election antics, culminating in the mob breach of Capitol Hill security, merely put a fine point on it. 

Philosophy

From 2015, even from his first public speeches following his presidential run, it was clear that Donald Trump was not a conservative in the Reagan tradition but was selling something of which we had no experience in politics during most lifetimes. He was reviving what I’ve called right Hegelianism that imagines the trajectory of history culminating in the ideal of a nation-state unified and managed by a great leader. In other interactions of this ideology in the interwar period, this unity is economic, social, cultural, religious, and racial.

This is not an American ideal. It’s not about freedom, rights, the rule of law, much less the limits on government. It imagines not a head of state that manages the government but rather an overarching central leader that manages the whole country in all its aspects. The US Constitution was structured not only to prevent such a system but to work as a rebuke to it. The first three words, “We the People,” were chosen carefully to embrace a self-managing society, not one ruled by a person over and over everyone else. 

There are many instantiations of right Hegelian ideology but all end up rallying around trade protectionism, migration restrictions, and the centralization of power in the executive. These were the main themes of the 2016 Trump campaign. These themes were not, however, what drew the Republican rank and file to his candidacy. Instead, what the party regulars liked about him was his brash and aggressive willingness to stand up to his enemies. His anger and relentless attacks thrilled people in the party who were fed up with playing nice with the left. That allowed them to overlook the aspects of his ideological push that stood in hard contradiction to anything like traditional American conservatism, much less classical liberalism. 

Trade

Trump’s first year began with a more traditional Republican agenda of tax cuts, deregulation, and non-progressive court appointments. Those who had worried that his right-populism and nationalism would predominate felt a sense of calm that things would work out after all. His regulatory appointments were solid free market people who believed in market forces and less centralization. My own grim predictions, made in Newsweek July 16, 2015, had begun to seem overwrought. Even I began to think I had been far too pessimistic. 

That all changed on January 22, 2018. That was the date that marked the end of peaceful trade relations with China. The Trump administration slapped high tariffs on the importation of solar cells and washing machines from China. This was the beginning of the trade war that would expand to Europe, Canada, Mexico, most of Asia, and ultimately the entire world. Some apologists claimed that this was nothing other than an attempt to gain trade concessions so that free and fair trade would be achieved. There was no evidence for that, however, apart from the periodic and perfunctory claims by Trump himself that he was not against trade. 

The problem was that his actions belied his reassurances. Every policy decision was more extreme than the last. “Trade wars are good” and “easy,” tweeted Trump on March 2, before slapping tariffs of 10-25% on steel and aluminium. Administration spokesmen assured the public that there would be no retaliation, a prediction that defies all known experience. 

Thus did it all unfold as the year went on. His one-man campaign to reverse 70 years of progress in trade culminated in a vision more astonishing than anything I could have predicted. Foreign Policy put a fine point on it: Free Trade Is Over

The Trump administration went one further and imagined that it could and would decouple the US economy from China entirely. In a digital age with infinitely complex and interlocking supply chains extending the world over, this hope amounted to violence against a major source of prosperity since the end of the Second World War. What he ended up seeking was nothing short of trade autarky. This not only pillaged Americans of $63 billion in one year alone; it dramatically reduced US influence in the world, not only over trade deals (China keeps making them, even with the UK) but also over fundamental issues of democracy and human rights (Hong Kong has effectively lost its independence and the US was powerless to stop it). To top it off, a trade war designed to push exports over imports ended up reducing the export contribution to US GDP to the lowest level in ten years. 

There was bitter irony associated with his one-man rule over US trade policy. The US Constitution clearly grants that power to Congress. But following the 1930 disaster of Smoot-Hawley tariffs, Congress began systematically to turn that power over to the executive. The belief is that the White House will always be inhabited by a well-educated person who will understand how important global trade is to peace and prosperity. Mostly that has been true. The plan worked until it did not. For fully three years, the world watched in astonishment as one man’s autarkic vision prevailed over the interests of every member of Congress, one hundred plus countries, and hundreds of millions of exporters, importers, and consumers. 

Migration

Alongside the hope for national economic independence there was of course the immigration agenda. It began early on with a policy most conservatives embraced: an end to illegal immigration. If you listened carefully, however, you would notice that this was more than a concern about bad actors getting across US borders. Trump frequently spoke about job displacement – which should have been a sign that his immigration agenda was not, at its core, about security or race but was a mere extension of his protectionist trade policies. He intended to keep out both goods and people because he believed, sincerely, that this was the way to make America great. 

There were grave consequences of his policies both economically and politically. The US population is growing more slowly than in many decades. In effect, he cut countable immigrants by two thirds of the pre-Trump levels. This has caused the US to experience a labor shortage in retail and hospitality, at least until lockdowns so severely harmed those industries. It’s profoundly affected the tech industry as well as building, construction, and agriculture. Immigration has made a mighty contribution to economic progress, so slashing of the legal levels – and effectively abolishing immigration in 2020 – has had devastating consequences. 

Even before the lockdowns of the Spring of 2020, the business community, which one might have supposed would favor his capital-gain tax cuts and deregulatory pushes, turned decisively against the Trump administration and Republicans who failed to stop his dramatic departure from a Reagan-style economic agenda. This created an unprecedented shifting in business community support for the Democratic Party and turning ideologically left. 

Lockdowns

The Trump administration’s nationalist push was regrettable enough in its trade and immigration policies. But when it came to the coronavirus, it became absolutely devastating and ultimately wrecked the presidency. The turning point was January 31, when a ban of flights from China took effect. Trump reports he did this on his own, against the advice of everyone around him. It had previously been a well-established principle that flight bans do nothing to curb or mitigate viruses, especially since the virus was already here

The hope here was surely propagandistic: the belief that the guilt for the virus itself could be pegged on China. Just as they are stealing intellectual property, selling us too-cheap goods, and dishing out compromised technology, so too are they sending us pathogens on airplanes. As with goods, the answer is to use the power of the state to stop the virus. That also put in motion a dangerous trajectory. Why allow any flights from anywhere? For that matter, why should states allow visitors from other states? If the goal of pandemic policy is to minimize exposure, even among non-vulnerable populations, the result would have to be a fundamental upending of life itself. 

Sure enough, on March 12, Trump addressed the nation with a disastrous message in which he announced his complete change of mind on the virus. Having dismissed it previously as just another flu, he now saw the opportunity to be the savior to the nation by battling the virus with all his power and prowess. 

At the end of the message, he made a shocking announcement. In four days time, all flights from Europe would be blocked. Just incredible and certainly without precedent outside of wartime. Indeed, such travel blocks are fixtures of war, deployed in the name of disease mitigation. The panic around the world was palpable, as people scrambled to book flights back as soon as possible. Huge crowds mingled for many hours in international airports, trying desperately to get back to the US before it was too late. Those travel restrictions were not lifted at any point in the remainder of his presidency. 

It was the same with embassies and consulates issuing visas for coming to the US. It was all shut down. No more students. No more workers. No more tourists. The actions on the part of the Trump administration were so draconian and despotic. Though the president would variously claim that his actions saved millions of lives – as many as 4 million even – there is no evidence that blocking these flights and migrations achieved anything. The virus was already here and the US became the world’s leading hotspot. His actions caused a policy and political panic throughout the country. By March 16, most of the country was shut down with stay-at-home orders, limits on hospital use, closed schools, and blocked public gatherings. The lockdown was here, courtesy of the Trump administration, and the economic costs were astronomical. 

We often hear people denying that this was the Trump administration’s doing – Trump would later become an advocate for opening up – but it clearly was. The administration’s own Department of Health and Human Services released on March 13 a classified edict: “The U.S. Government COVID-19 Response Plan.” It recommended school closures and business shutdowns. The federal government worked closely with all the states to follow this document, which had clearly been in the works for weeks if not months. Three days later, stocks crashed 13% – not because of the virus that had been here for months but rather because of Trump’s initial lockdowns. 

After two weeks to flatten the curve turned into two months, and governors of many states continued to keep their economies closed, Trump began to smell a rat, wondering whether he had been tricked into destroying his own presidency by wrecking the economy. By mid-April, he began to call for opening up the economy. But even here he had doubts. Georgia became the first state to open in late April, but Trump tweeted against it, claiming that it was too soon. Thus did his messaging become completely confused. Was he for or against opening, did the shutdowns save lives or not, should states seek normalcy or keep stringencies? 

This lack of clarity, this toggling back and forth between claiming the lockdowns saved millions of lives while at the same time demanding an opening, continued through September. Good sense at the White House did not arrive until public health specialist Dr. Scott Atlas of the Hoover Institution arrived finally to convince the president of the science and the facts. In doing so, he had to battle what amounted to a pro-lockdown fifth column within the White House itself. 

By then, it was far too late for the administration to gain control of the narrative. The economy had been smashed, people’s lives wrecked, children and parents traumatized, and the country had become consumed with mass disease paranoia and virus avoidance. Leading into the final days of the campaign, and probably convinced that he had been gaslighted all along, Trump took a different strategy of avoiding the topic of the virus completely. 

Carnage

To everyone’s complete astonishment, 2020 became the deadliest year in US history, and not only because of the pandemic. Deaths of despair due to lockdowns, murder, drug overdoses, and other deaths due to throttled medical care in other areas were also major contributors to the year of tragedy. By now, there are at least 28 studies proving that lockdowns do not work. Meanwhile, in China, the country that Trump had targeted three years earlier, had long ago abandoned the lockdowns it had sold the rest of the world and clocked a 6% GDP growth in the fourth quarter year over year. 

In addition to this calamity, US government spending soared 47% while the money supply registered record increases as measured by M1. The effects of this debt and money printing will be felt through next year. In addition, New York City is in shambles, Washington, D.C. looks like an armed camp, and most states still have terrible stringencies in place enforced by police power. At least 150,000 businesses are dead, 1 in 4 women with children have left the workforce, millions of kids have lost a year’s worth of schooling, in addition to other staggering costs

None of this is great. It is a nightmare. 

Counterfactuals are impossible but nonetheless tempting. What if the Trump administration had not alienated virtually the whole of the business community with its attempt to reverse 70 years of progress in global trade? What if it had pursued the path of sincere diplomacy rather than coercive belligerence with China? What if it had pushed legal reforms in immigration rather than executive edicts? And what if in January the White House had consulted traditional public health experts rather than allowing career bureaucrats to talk the president into locking down? 

We can never know the answers to these questions. But it is likely the case that the country and world would be a very different place than it is today, perhaps even a greater place. The economic policies of the Trump administration constitute one of the greatest lost opportunities of the postwar period. We’ll be paying the price for decades. The fundamental problem traces most fundamentally to an illiberal philosophy behind the seeming policy chaos. Repairing that problem is essential to laying the necessary groundwork to recover what has been lost. 

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