Candidate Donald Trump’s proposals on trade and some other issues didn’t seem at all compatible with conservative Republican ideology. So, after watching congressional Republicans obstruct President Obama for almost eight years, I expected some of the same pushback for incoming President Trump. And I thought the stock markets would react negatively. Oh, how wrong I was.
Of course, Trump never misses an opportunity to claim credit whenever the S&P index sets a new record or the unemployment rate falls. In fact, his supporters are glorifying the past three years as “the Trump economy” even though it has simply followed the positive trends established under Obama.
When Obama took office though, the unemployment rate was soaring. It reached a peak of 10 percent in October 2009 and remained above nine percent for two grueling years as the global economy staggered from the powerful blow of the Great Recession. When Trump was inaugurated in 2017, unemployment was at 4.7 percent and falling. The positive jobless trend that started in 2010 just continued all the way down to 3.5 percent in 2019.
Trump and the Republicans assured us that economic growth would average 3 percent or more after they passed a huge tax cut for corporations and the wealthy at the end of 2017. Yet, recession fears caused the Fed to cut interest rates three times last year.
A report by the Institute on Taxation and Economic Policy revealed that almost 400 of America’s largest corporations had an average tax rate of around 11 percent for 2018, almost half the rate in recent years. It also found that 91 Fortune 500 corporations, including many worth billions of dollars, paid zero federal taxes that year.
Conservative dogma dictated that these companies would invest their tax benefits in new plants and equipment that would supercharge the economy. Instead, they have mostly bought back stock and increased dividends, which drove the stock markets to record highs and rewarded shareholders. U.S. manufacturing was actually in recession for most of 2019.
Hmm, if lower taxes aren’t fueling today’s economy very much, what has Trump done to deserve credit for it? Well, it’s clear to me; Republicans have assiduously avoided what they constantly demanded of Obama’s administration – cutting spending and balancing the federal budget.
Remember July 2011? Tea Party Republicans in the U.S. House nearly caused a default on the nation’s debt over deficit spending. The result was the Budget Control Act of 2011 that forced the Obama administration to accept caps on the amount the federal government could spend each year through fiscal year 2021. More on these caps later.
Still, there was a battle to fund the government and raise the debt limit so the government could continue borrowing almost every year thereafter. Republicans shut down the government over spending and Obamacare in 2013; they nearly caused another disastrous default on the debt in early 2014; and they threatened to oust Speaker of the House John Boehner (R-Ohio) in 2015 because he had – Gasp! – compromised with Democrats to keep the government running.
Before resigning from Congress, however, Boehner negotiated the Bipartisan Budget Act of 2015 with Obama. This legislation funded the government through FY 2017 and suspended the debt limit.
Did Republicans cause gridlock and fiscal drama over federal spending during Obama’s tenure? Absolutely! Do I believe this was about deficit reduction? No! It was more about obstructing a Democratic – dare I say black – president.
Sure, Republicans still pay lip service to fiscal restraint. Trump’s yearly budget proposal for 2017 called for trillions of dollars in spending reductions that would virtually gut the federal government. And the Republican-controlled House passed the Budget for a Brighter American Future for fiscal year 2018 that would slice $6.5 trillion from spending over a decade – mostly from federal health care programs like Medicaid.
The 2011 budget caps for fiscal years 2014 through 2017 had been exceeded by small increases in federal spending. But with Republicans in complete control of Congress in February 2018, Trump signed the Bipartisan Budget Control Act of 2018. This legislation added almost $300 billion in additional funding for FYs 2018 and 2019.
The Bipartisan Budget Control Act of 2019 that Trump signed in August 2019 added over $320 billion more to federal spending for FYs 2020 and 2021. Republicans had almost no problem letting Trump obliterate the spending caps they imposed on Obama.
But here’s the thing. Over the past three years, Republicans have totally destroyed the credibility of their core policies – cut taxes for economic growth and balance the budget.
- The 2017 tax cut failed to produce a surge of investment by businesses or the wealthy that received most of the benefit. It’s consumer spending that has propped up the economy, even though middleclass taxes weren’t lowered significantly.
- Instead of demanding that the federal budget be cut by $6.5 trillion over the next decade and balanced – as proposed in their Budget for a Brighter American Future – most Republicans voted to add over $3 trillion to the national debt since Trump’s inauguration.
In reality, it’s the massive government spending that Republicans always rail against that has provided the stimulus to keep the economy chugging along and unemployment at record lows.
Trump and his Republican allies have replaced sound, coherent policies with obfuscation and lies like “Tax cuts pay for themselves;” and “Trade wars are easy to win.”
“The Trump economy” is just another one of them.