Now we have a full year of data and that real-world evidence can be used to grade Trump’s first year in office.
But before I get into the details, allow me to start with a broad observation. William F. Buckley famously said that he would rather be governed by 2000 random people from the Boston phone book than by the faculty of Harvard University. Well, one can argue that he posthumously got his wish. The 2016 election was a choice between:
- Hillary Clinton, a very well-credentialed leftist who would have staffed her administration with other well-credentialed leftists (the Harvard faculty in spirit), who nonetheless was defeated by;
- Donald Trump, a novice politician who has random-guy-from-the-phone-book opinions (as I described him to a TV audience in New Zealand, he’s “your Uncle who spouts off at Christmas dinner”).
It’s not my role to say whether the American people made the right choice, but I am willing to analyze the economic consequences.
So let’s look at the five major policy areas that determine a nation’s level of economic liberty and see whether Trump is moving America in the right direction or wrong direction.
- Fiscal Policy – It’s not easy to give Trump a grade because he’s like Dr. Jekyll and Mr. Hyde on the budget. On the tax side of the ledger, he pushed for and ultimately signed a better-than-expected tax bill featuring an impressive reduction in the corporate tax rate and some much-needed limits on the deductibility of state and local taxes. On the spending side of the ledger, however, the first year of Trump has been a disappointment. According to the Committee for a Responsible Federal Budget, he actually approved more than $250 billion (over eight years) of additional outlays. And we haven’t gotten any entitlement reform (though Trump supported the Obamacare repeal legislation on Capitol Hill, which included some reasonably good spending provisions). Trump Grade: B
- Trade – Trump has moved policy in the wrong direction, though the first year was not as bad as feared. In other words, he been doing a lot of saber-rattling, but fortunately not drawing too much blood. That being said, he is threatening to pull the United States out of NAFTA, which would be a very big mistake. Trump Grade: D
- Regulation – This is Trump’s best issue area. He’s rolled back some Obama-era regulations, and he’s made some very sensible appointments, which means there’s hope of ameliorating the statist orientation of bureaucracies such as the FDA and the FCC. Trump Grade: A-
- Monetary Policy – Trump hasn’t said much about monetary policy, so we can only grade him on the basis of the people he has appointed to the Federal Reserve. But even that doesn’t allow us much room for analysis since his picks have been very conventional. One hopes a Trump-influenced Fed will support a gradual end to artificially low interest rates, but that’s unclear at this stage. Trump Grade: C
- Rule of Law – Trump has been aggressive with executive orders, which worries me even if I happen to agree with the underlying policy. The White House hasn’t tried to flout court decisions, however, so that’s a good sign. The appointment and confirmation of Justice Gorsuch also bodes well (assuming he doesn’t “grow in office” like Justice Roberts). Trump Grade: B-
Overall, I think economic policy has moved slightly in the right direction, and I’ll be curious to see whether my back-of-the-envelope grading is confirmed by Economic Freedom of the World.
Here’s some of what I wrote for the latest issues of Cayman Financial Review.
…his first year in office has been a net plus for the U.S. economy. The regulatory state has been curtailed and a semi-significant tax reform has been enacted. …Equally important, Trump has not destabilized global trade. His protectionist rhetoric has not (yet) translated into major anti-trade initiatives. Nor has he implemented any populist policies on immigration or the budget. In other words, we have dodged a bullet. …That is the good news. The bad news (or, to be fair, unsettling news) is that Trump still has at least three more years in office. …The fact that Trump’s first year has been characterized by a “normal” set of Republican policies is besides the point. Almost everyone assumes he is capable of doing something out of the ordinary.
I’ll close by making a second broad observation. The fact that economic liberty increased during Trump’s first year in office does not mean that his presidency will be a net plus. It’s possible that his personal unpopularity will trigger a backlash that makes it easier over time to impose statist policies (just as I suggested that a Hillary victory might have produced desirable long-run consequences).
Check with me in 2021 for a final assessment on whether picking a president from the Boston phone book (metaphorically speaking) was a good idea.
P.S. For what it’s worth, here’s a speech I gave back in Trump’s first month in office. I think my predictions were on target (mostly because I paid attention to what Trump was saying, not because of any special insight).
P.P.S. Whether you’re a left-leaning opponent of Trump or a right-leaning opponent of Trump, remember there’s always the silver lining of mockery.
Daniel J. Mitchell is a Washington-based economist.