I think the president is overrated. I don’t mean this president in particular, but the presidency in general. The president certainly has a great deal of power, but I think he is often credited too much (or discredited too much) for the overall economy.
There is no question that the president matters. The president approves legislation, which includes budgets, and only a two-thirds majority in Congress can override a presidential veto. A president can also set the tone and the agenda. Even with Trump, who is perhaps the most hated president ever by the establishment media, has a bully pulpit. He not only has Twitter, but he could call a primetime speech at any time, and the networks would feel compelled to cover it.
If Ron Paul had been elected president and allowed to take office, he would have withdrawn troops from all over the world, or at least we can guess this is what would have happened. If he had taken office and not followed through on this promise, then a democratic and peaceful revolution really would have been hopeless at that point.
But let’s say Ron Paul had taken office (it doesn’t matter if it had been 2009 or 2013 or 2017). Just by ending the wars and bringing home the troops, hundreds of billions of dollars could have been saved right there on an annual basis. Those resources could have been used to satisfy consumer demands. In addition, a President Paul could have vetoed every single budget bill, or at least vetoed every bill that ran any kind of deficit. Maybe Congress would have overridden him, but you can be pretty sure that some domestic spending cuts would be made. Just the fact that Ron Paul was elected (in our example), the politicians would have felt somewhat compelled to go along with the electorate.
In this sense, a radical politician who advocates free market policies could dramatically improve the economy for the better in the long run. But if there were massive spending cuts and a liberalizing of markets, it might expose some of the malinvestments from previous times. You could still get what feels like an economic downturn while resources realign according to consumer demand.
In our reality, the economic policies from administration to administration do not change much. There wasn’t that much difference between George W. Bush and Barack Obama. Bush actually ramped up spending faster than Obama did. Bush gave us Medicare coverage of prescription drugs. Obama gave us Obamacare. There were small differences in tax rates. Bush gave us Bernanke, and Obama gave us Yellen at the Fed.
Trump has perhaps been slightly better in terms of regulations. There were some elements of the tax reform package that were positive, especially the cut in corporate tax rates. Still, spending is continuing to increase. The debt is continuing to increase at a rapid pace. Trump is a mercantilist who believes in protectionist tariffs. And his appointments to the Federal Reserve consist of more Keynesians.
So unless a president is going to radically break from the status quo, the president does not impact the economy that much. It is more a matter of timing and a matter of Federal Reserve policy.
Trump Takes Ownership
Unfortunately for Trump’s sake, he is taking full ownership of the supposed boom that is happening now. He is touting GDP and other government statistics. Worst of all, he is touting the stock market.
In a recent interview on CNBC, Trump said, “The stock market is up almost 50% since my election. Had the Democrat won [Hillary Clinton], I believe you would have been down 50%.”
I think he is going to really regret those words.
He can’t avoid taking ownership now. If he is using the booming stock market to brag, then what is he going to say when it goes bust? He can’t turn around at that point and talk about his warnings of a bubble during his campaign.
If Trump is still president in November 2020 when the next presidential election occurs, it is a safe bet that we will have had some kind of bust at that point. My bet is that the stock market will be lower at that time than it is now. And if it is higher at that point, then it will be because the Fed has started another round of massive monetary inflation.
Trump’s job in dealing with the media and intelligence agencies is hard enough. But when stocks crash, he will have nobody to blame but himself. He would have had a case to be made if he weren’t bragging about the stock boom. But now, if a recession hits, most people are going to blame him, and he isn’t going to have any good response. His approval ratings will drop below where they are now.
The only thing we can do is to refute Trump now, before the crash hits. The boom in stocks does not have a lot to do with Trump’s presidency. Part of the portion that is attributable to Trump’s policies is artificial and unsustainable.
When things get bad economically, let’s hope enough Americans understand that it wasn’t the free market that brought us to this point. It is government regulation, massive government spending, and Federal Reserve manipulation of the economy that make our living standards lower than they otherwise would be.