The Trump Years: Tax Cuts and Trade Wars Overshadowed in the End by a Virus
From trade wars to tax cuts, from ultra-low unemployment to record highs on stock markets and a high-volume feud with his own Federal Reserve chief, President Donald Trump took the U.S. economy on a wild ride even…
From trade wars to tax cuts, from ultra-low unemployment to record highs on stock markets and a high-volume feud with his own Federal Reserve chief, President Donald Trump took the U.S. economy on a wild ride even before the coronavirus drove it off a cliff.
How to sum it up?
The answer as of February 2020 would be different than the answer today. A year ago, the U.S. economy seemed to have settled into a sweet spot of steady growth, low unemployment, low inflation and, finally, rising wages. Trump may have hated the Fed, but in the end the Republican president and the U.S. central bank reached a truce that kept a decade of growth chugging along, and pushed the unemployment rate to a 50-year low.
The pandemic changed all that and will likely leave some deep economic scars. Here’s what stands out:
EMPLOYMENT-TO-POPULATION RATIO
Broader than the unemployment rate, the statistic captures the numbers of people not just out of work and looking, but who also who have left the labor force altogether, a particular concern during the pandemic. It had been improving steadily and continued to do so under Trump – until March 2020.
“You see it collapse with the virus shutdown and see it bounce back at a rapid pace, then stall,” said Austan Goolsbee, chair of the Council of Economic Advisers under former President Barack Obama and an economics professor at the University of Chicago’s Booth School of Business. “That basically describes the trajectory of the economy. The biggest cause is obvious. The raging out-of-control nature of the virus, which is absolutely tied to horrible policy mistakes and oversight.”
FEDERAL FUNDS RATE
The story of the Trump years can be seen also in the Fed’s benchmark overnight interest rate, also known as the federal funds rate, which was increased as tax cuts and deficit spending led to higher-than-expected economic growth, lowered when a trade war started to grind down global commerce, and cut to near zero when the pandemic hit.