The economy is doing pretty well by traditional measurements such as unemployment — now at a nine-year low of 4.6 percent — and growth — currently at an annual rate of more than 3 percent. But Donald Trump regularly dismisses such numbers, describing the official unemployment rate as “total fiction” and slamming President Barack Obama for failing to stem the loss of industrial jobs.
So now that the Obama economy is about to become the Trump economy, Trump is likely to focus on the metrics that drove his campaign: wage increases, manufacturing jobs, a larger labor force, a declining trade deficit and faster overall growth.
And if the American economy fails to advance on these fronts, Trump may simply redefine what success looks like.
“Some of the traditional measures of economic success like the top-line unemployment rate aren’t really very meaningful anymore,” said Stephen Moore, a Heritage Foundation scholar who advised the campaign on economic policy. “Trump will be measured on how well he does bringing economic development to areas that never felt the recovery, and that means Michigan, Pennsylvania, Ohio, Wisconsin and more rural areas in places like Virginia and the Southeastern states. That’s how he won and he has to deliver for those people.”
Doing so will not be easy, many experts say.
If Trump imposes tariffs on imports, as the transition team has suggested he might, the immediate impact would likely be to increase prices for consumers and also for U.S. manufacturers who rely on a global supply chain. And new manufacturing jobs in the U.S. tend to be automated or require a higher level of skill than many workers possess. There were 322,000 manufacturing job openings in October but employers filled only 271,000 of them, according to the latest government data, suggesting a mismatch between openings and skills.
Wages are already rising, so Trump might be able to simply claim credit if the trend continues. But the labor force has been stuck near historic lows for years. Trump’s plans for lower corporate taxes and fewer regulations could lead to somewhat faster growth, analysts say.
But that growth could take several years to develop — a tax reform plan may not even be enacted until the second half of next year — and there is no guarantee it will draw back in workers who left the labor force during the most recent recession and have not returned. All of this means the return of widespread manufacturing gains in the Midwest that Trump promised may not materialize.
Coal industry job declines could ease if Trump rips up current regulations, but big gains could also be elusive there, given the decline in coal’s share of American electricity production.
“He’s likely to be unsuccessful on any sort of broad increase in U.S. manufacturing jobs,” said James Pethokoukis, a scholar at the American Enterprise Institute. “That line may blip up or down based on how the economy is doing but these are long-term trends that aren’t likely to change.”
Trump transition officials did not respond to a request for comment on how the administration would measure economic success.
In the face of all these challenges, Trump could simply use anecdotal examples of new manufacturing and coal industry jobs, seize on any further increase in wages, decide the jobless rate is now legitimate and declare victory.
“The president-elect judges his own personal wealth based on his own feelings,” Pethokoukis said. “So on any given day, he could just decide based on his feelings that America is great.”
Critics of Trump’s approach suggest this may be the most likely outcome given current structural problems in the economy and the president-elect’s tendency to spin any failure as a great success. In Atlantic City, for example, Trump faced multiple bankruptcies yet declared in a New York Times interview earlier this year that, “the money I took out of there was incredible.”
Trump proved adept during the campaign at defining his opponents and could attempt to do the same on the economy even if he shows limited success on his own benchmarks.
“In all likelihood, he will fit his commentary and narrative with a success factor no matter how unsuccessful he is in regard to policy,” said Douglas Kass, president of investment firm Seabreeze Partners. “That is the way he thinks and justifies most of what he does.”
This could prove most difficult for Trump in on of the areas on which he focused most heavily during the campaign: the U.S. trade deficit.
Trump consistently railed about the imbalance, especially with Mexico and China, on the campaign trail. “We don’t have to continue to lose $505 billion as a trade deficit for the privilege of dealing with China,” he said at a GOP debate in January. In another debate, he pledged to reduce “a trade deficit with Mexico of $58 billion a year.”
But the immediate reality is that the U.S. trade deficit, which was $531.5 billion in 2015, is likely to get wider under Trump as the dollar continues to rise and U.S. exports get more expensive. Trump’s plan to cut taxes and fuel growth could drive the dollar and interest rates even higher, putting more pressure on the trade deficit.
This has led some conservative Republicans who otherwise support Trump to wish he would drop his focus on the trade deficit as an indicator of economic progress.
“It’s regrettable but he may look at the trade deficit as a measure of his success,” said one senior Republican who declined to be identified by name as criticizing a president-elect known to punish those he perceives as enemies. “I would argue that if the pro-growth elements of the program work, then the trade deficit is going to get larger, probably quite a bit larger.”
For many more traditional Republicans, the size of the trade deficit really doesn’t matter as it can simply reflect foreign investors pouring capital into the United States.
“Trump’s policies will create a lot of investment in the United States, this was the story in the Reagan years,” said Moore. “When that happens, you get a current account surplus and a trade deficit. But what matters is total exports. No one really thinks the trade deficit is a really important measure.”
Well, no one but Trump.
A rising trade deficit — even among other improving indicators — could be tough for the incoming president to explain away. But if anyone can simply shift the definition of what it means to be great, it’s Trump.
“He may just have to tell us when America is great again,” said Pethokoukis.
Author: Ben White