Since both Biden and Trump have records as President, the press is full of articles like this one attempting to compare their economic policies and evaluate the results.  Now that Harris has replaced Biden and announced a few measures, she’s in the game too.  Unfortunately most such articles completely miss the mark.

The reason is that you cannot judge anyone’s economic policy except in the context of the problems he or she faced.  And you cannot make any judgment of how good he or she would be as President now without assessing the problems we face today and comparing our needs against the candidates’ demonstrated approaches.

That may sound obvious, but I haven’t seen a single article that tried hard enough to be serious.  Let’s start with Trump.  Obama left the country in pretty good shape, but one has to understand that his whole Presidency was spent trying to recover from the 2008 crash.  In that he had done pretty well (compared to other western countries), but he had one serious problem:  particularly in his second term the Republican Party decided to sabotage the recovery.  Looking ahead to the 2016 election they essentially shut down government—promoting a “balanced budget amendment” as a reason to block all stimulus spending.  That left some work to be done with unemployment, for example. So that’s what Trump inherited—a good economy that had been throttled short of complete recovery.

As soon as Trump took office the “balanced budget amendment” discussion vanished, and Trump stimulated the economy with a 2 trillion dollar budget deficit.  That completed Obama’s recovery at enormous cost to the country. For comparison, the largest stimulus Obama was able to get through Congress (in his first term) was about $500 M.  The vast part of Trump’s $2 T did not go into jobs or corporate investment; it went into stock buybacks.  Trump bought maybe $500 M of progress with a $1.5T contribution to inequality in the US.  Further, despite all the talk of reviving manufacturing, US manufacturing (as a sector) was in recession before Covid hit.  Once Covid happened, Trump simply retreated from running the country.

Biden inherited a mess.  First we had to recover from Covid, so there was much time and effort spent on getting the vaccine to everyone.  In this the biggest single problem was sabotage by misinformation from Republicans in general and Trump in particular.  During Covid there was a series of bipartisan deficit-funded bills to keep the country running with progressively less Republican support.  Once recovery started, however, there were some big surprises.  In key areas supply and demand were badly mismatched—there was a massive shortfall in computer chips needed for cars and other big-ticket products, new patterns of demand appeared for housing reflecting living arrangements during the pandemic, and the shipping industry took many months to be fully back in business—causing shortages of all kinds of imported products.  There were also shorter-term spot shortages, which led to longer-term price increases from major suppliers happy to take the chance.

Biden’s last (Democrat-only) stimulus has been blamed for all inflation that followed Covid.  Many articles have been written about his terrible mistake—the money delivered to US families didn’t even cover the inflation of the following year!  That conclusion ranks with the “balanced budget amendment” for self-serving dishonesty.  Given the magnitude of those other inflationary pressures, there is no question that the stimulus payments covered considerably more than any inflationary effects of the stimulus itself (and inflation in the US was lower than anywhere else in the Western world—stimulus or not).  Biden was correct in deciding that there was a fair chance that the post-Covid recovery would not be painless, and that stimulus money was needed to help people. In so doing he violated the mantra that the Republican Party is most desperate to defend: “you can’t spend money to help people”.  Help only comes top-down, from money spent on us.  The best commentary on this subject comes from Adam Smith himself:

“The proposal of any new law or regulation of commerce which comes from this order [merchants and manufacturers], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”  (Wealth of Nations, Book 1, Chapter 3)

Before we leave this subject of inflation there is one more question that needs to be answered:  why, despite the huge budget deficit, was there no inflation under Trump?  The main part of the answer has already been noted—the country was not yet completely out of the 2008 crash.   There was no wage pressure, and people were not ready to spend.  Furthermore we had actual downward pressure on prices from those evil Chinese—all that cheap stuff in Walmart was keeping prices low.  By Trump’s third year there were signs of a rise in wages, but then Covid hit and that was the end of that.  As far as inflation was concerned, Trump was “saved by the bell”.  As we noted at the beginning, you cannot say anything sensible about a President’s economic policy without putting it in the context of the time.  Trump did not prove that he knew how to run up a huge deficit without inflation any more than he proved he could fight Covid with bleach.

Biden got the country going again and finally started rebuilding the country’s decaying infrastructure and  undertaking changes that will be required (whether we like it or not) for climate change.  He recognized the importance of education, although he was blocked from doing as much as is needed to provide opportunities for all (and the costs of his programs were hugely exaggerated).  Manufacturing is now in vastly better shape than under Trump.  He has also started with the task of finally doing something about decades of consolidations and monopolies during our period of non-enforcement of anti-trust laws.  It needs to be emphasized that anti-trust activities are NOT examples of overreach of government against the free market.  Even Adam Smith (again) emphasized the need to combat monopolies, and not just because they make things more expensive—they block innovative new businesses, make the country less competitive, and even weaken a nation’s military strength.

At this point it’s time to stop describing the historical context and consider where to go from here.  The first conclusion is probably the most important:  there is nothing in Trump’s historical performance that shows competence in managing the economy.  He gave himself (and his ilk) a big tax cut, that helped an artificially-stunted recovery (at very high cost), and avoided inflation only because of the incomplete recovery and because Covid bailed him out. That history is no recommendation.  We cannot let ourselves be tricked by the blindness of all of those economic analyses without context:  “Trump’s tax cuts led to full employment last time, so maybe they’ll be good this time too.”  ARGH!!

So the question of Trump’s economic competence comes down to his economic plans.  While Trump has been vague about many things, there are three items about which he has been absolutely clear:

• A complete tariff wall around the US protecting all US industry, 10% overall and 60% on imports from China.
• Deporting all undocumented immigrants, amounting to at least 11 million people
• A huge tax cut modeled on his last one, currently estimated to cost $4 T.

The attitude of economists on this subject was summarized in a recent NY Times article:  not just bad but catastrophic.  We have to get used to that idea.  The fact that Trump got through his first term is not proof that he knows what he’s doing.  The plan can really be completely crazy.  Remember Trump’s six bankruptcies. Also, we have to get used to the idea that economic stability is not guaranteed.  The Brits voted for Brexit, and their standard of living took an immediate hit from which it may never recover.  This plan is actually worse.

We’ll go briefly through the items one-by-one

The Tariff Wall

Tariffs (including Trump’s tariffs from last time) are effectively a tax paid by the buyer in higher prices.  A universal tariff like this one is therefore massively inflationary and not just for imported goods.  Historically (and in Trump’s last term) domestic producers also have taken the chance to raise prices. Universal tariffs also invite retaliation and diminished US clout worldwide.  Given the level of consolidation in the US economy, the tariffs will significantly reduce competition and dynamism of business domestically, as many markets will be monopoly or cartel controlled.  And by isolating the US from developments elsewhere, it guarantees that the US will be left behind for any developments that don’t originate here, making us a second-class power.

Deporting 11 million people

These people are working today.  We’re eliminating the lowest tier of the workforce, with no obvious new population to take over.   Both the loss and the disruption are massively inflationary.  Many of those jobs may never be filled.  The Brexit people found that they had to import a whole new bunch of foreigners to replace the ones they were so happy to get rid of.

The $4T tax cut

The huge deficit is again massively inflationary.  The only reason that didn’t happen last time is that the economy was still short of recovery—which is not the case now.  Further the huge deficit would be on top of all other spending issues we will have to face, including for climate change and defense.  Businesses didn’t need it last time–they spent it on stock buybacks, not on investment in the business or on the employees. Last time’s claim that it would pay for itself proved completely untrue.

We are talking about a real hit to everyone’s well-being with no short-term path to recovery.  And that’s before even thinking about the threats to democracy.

Finally we need to end this with a look  at the other side.  If that’s what we’re getting from Trump what would we be getting from Harris?  After all we’re told she’s a wild-eyed radical.  Her running mate was so far left that he spent government money giving meals to school kids!

There’s nothing in the Democrats plans that talks about anything close to a 4 trillion dollar deficit.   There’s nothing in the Democrats plans that talks about engineering of people’s lives the way Vance is so eager to do.  Isn’t freedom from that sort of thing what made us different from the hated communists?

What is different is positive.   There is a role for government in making people’s lives better.  That means education, jobs, a future.  Harris’s initial proposal talks about aid for families with children and combating the kind of post-Covid price-fixing mentioned earlier. There is also a role for government in helping the private sector with things it doesn’t do well—like anti-trust, like educating the population for the jobs that need to be filled, like preventing business from croaking on climate change because doing something reduces immediate profits.  No one is talking about hurting business competitiveness, but it is the task of government to act in the interest of everyone.

This is an election where the country needs to reject what is radical egomania and return to what are in fact our long-time values.