Q&A: The triumph of Trumponomics
Economist Stephen Moore tells American Experiment President John Hinderaker how the business-friendly policies of the federal government have jump-started the American economy.
Tell us about your introduction to Donald Trump.
I have to say I had a negative opinion of Trump before that meeting. I had never met him before, but when I went into that meeting, he was so incredibly charming, he was gracious, he was attentive. He couldn’t have been nicer. I hate the word charismatic, but he is charismatic. He has that aura about him.
The first thing I said to Donald Trump, was, “Donald, I don’t know if I love you, but I sure love your voters. I love these middle class, working class Americans who have been left behind and have not felt this so-called recovery under Obama. And I love the fact that you’re reaching out to those forgotten people, the forgotten men and women of the American economy.”
I’ve been around politicians my whole life. I’ve known governors, presidents, congressmen, city council members. This is the thing that I think is most interesting about Donald Trump. Ninety-five percent of the politicians I’ve met with are wonderful people in public, and jerks in private. Donald Trump is a wonderful person in private and a jerk in public.
I think that he has the right perspective on how to solve a lot of the major problems that face America. As with very successful American politicians, I’d go back to Reagan, or Clinton, or Obama, he has a charisma about him that is very engaging.
One of the reasons I supported him is he’s a successful businessman. He understands how to meet a payroll, how to make a profit. We’ve had too many presidents and politicians who don’t know anything about business. I would say that Trump, more than anything else, is pro-business, and that’s good.
Not everybody who knows about business also understands economics. How would you assess Donald Trump’s understanding of basic economics?
You can’t succeed in business without instinctively understanding the very basics. You know that you have to make a profit and that profit means that you have to be efficient in all sorts of things that are alien to government.
Look, Trump is not an economist. He’s wrong on some things. I disagree with him on trade, for example. Free trade is important. The United States benefits from having markets all over the world. I disagree with him about the dollar. Trump thinks a weak dollar will make our exports less expensive and the imports into the United States more expensive. Unfortunately, that’s not a good way of looking at it because if you reduce the value of your dollar all the dollars we have in our pocket buy less, by definition, and it makes America poorer.
Moreover, I’ve told Donald Trump that if the dollar goes down in value, the value of everything that’s in dollars will fall. Like stocks. If you want to see a stock market reversal, weaken the dollar. Weak presidents have weak dollars. Strong and successful presidents, like Reagan, Kennedy, and Clinton, have had strong dollars.
The Administration has accomplished a lot of regulatory reform. What are its most important aspects, and how significant is that to the economy?
Huge. I think it’s misunderstood. It’s not so much that Trump has rolled back regulation, though he has, and that’s important. Remember, he promised to repeal two regulations for every new one. He’s repealed something like 20 regulations. I think it has to do with the fact that he’s put pro-business people in charge of these agencies. People are policy. The personnel matter.
I’m having dinner next week with EPA Director Scott Pruitt. He is keeping the environment clean and safe but he’s doing it in a way in which our businesses can succeed. Under Obama, it was almost like the regulators wanted to put businesses out of business. It makes a big difference to address regulations in a way that supports business rather than trying to kill it.
Business people can look forward to four years without having some brand new massive set of regulations imposed on them.
I’m not here to rail against Barack Obama, but his philosophy was pretty much the opposite. Whatever the problem was, we had a government solution for it. We had the $800 billion stimulus plan. We had Obamacare. We had tax increases on the rich. We had the fed flooding the economy with cheap money and so on. Let me just put it very simply, it didn’t work. We got this lousy recovery. If the economy had grown as fast under Obama as it did under the Reagan policies, we would be as a nation $3 trillion richer today. That’s a gigantic number. Three trillion dollars is the equivalent of the entire annual output of Michigan and Ohio and Pennsylvania combined.
I would submit that’s why Americans were angry. By the way, there were whole areas of the country that didn’t feel the recovery at all. That’s what’s so interesting about this. Yes, if you lived in Washington, D.C., things were wonderful. Yes, if you lived in Silicon Valley, things were wonderful. Yes, if you lived in Hollywood, things were wonderful.
This is not original to me, but on November 7, 2016, the beatings stopped. I talked to businessmen and women, who were afraid, especially during the later Obama years. They were afraid of what Washington was going to do to them next. Businesses lived through Obamacare, the regulatory assault, massive increases in debt, and the tax increase. They were like: “What’s coming next?” Small business optimism went straight up, literally the day after the election. People said, “Hey, the beatings have stopped.”
Manufacturing, mining, construction are up, up, and up. These are those kind of blue collar jobs that we had been losing for the last 10 or 15 years, and it’s almost like a U-turn. Look at mining. I mean Donald Trump promised that he would bring back mining and the coal mining jobs. Hillary Clinton, remember what Hillary said? “If I’m elected president, every coal miner will lose their job.” She wonders why she lost West Virginia and Ohio. Look at that. Policy matters. Manufacturing, mining and construction are up by 500,000 jobs in a year. That’s pretty impressive.
The Tax Reform Bill obviously is huge. I think it’s extraordinary that we saw significant benefits from that legislation even before it took effect
It’s interesting because I was on the front line of this. By early October, the view on Wall Street really changed. Prior to that the view on Wall Street was that the Republicans don’t have their act together; they’re not going to get it passed. Then it started to change, and people started to say, “This is probably going to pass.” Once that happened, the stock market went way, way up. People were capitalizing. Look, if you cut the taxes on businesses and cut the taxes on profits, that means, by definition, stocks are more valuable because the government is taking a smaller share of them. That means the shareholders have more of the profits.
Liberals keep saying, “Trump didn’t really need to cut taxes because the economy was doing so well already.” Number one, the economy can always grow faster. Number two, they don’t get it that the reason the economy was already doing well is businesses were anticipating the tax cut was going to happen. So, that’s one of the reasons the economy has shifted from two percent growth to three percent growth in just the last year.
You emphasize the paramount importance of economic growth. Would you elaborate on that a bit?
When it comes to financial and economic issues, every problem we face as a nation requires a faster growing economy, whether it’s our national debt, reducing our deficit, fixing our schools, paying for infrastructure improvements, reducing income inequality, reducing poverty, or fixing our cities. We’ve been in a rut now for a decade, where the economy was growing at less than two percent. Did you know, for example, it’s been almost 15 or 16 years since the average American got a pay raise? Their wages are not higher today than they were back in the year 2000, and that was one of the reasons people were so frustrated with the political system.
What we said (during the campaign) is, what if we grow at three percent, not 1.8 percent? By the way, three percent is not shooting for the moon. The average growth rate of the U.S. economy over the last 75 years is 3.3 percent. We’re saying, what if we perform even slightly less well than we have over the last 75 years, what if we just get to three percent? By the way, Donald Trump believes we can get growth a lot higher than three percent. Just at three percent, look at the difference that makes. The point I’m making is growth really is critical.
Now the good news is that Donald Trump has only been in office virtually a little bit over a year, and that year that he’s been in office, guess what? The economy is growing at three percent. We’ve already got it up to three percent. That’s great. That’s great news, we’ve already got it up to three percent. That was before this tax cut really took hold. That’s really good news.
Faster growth is important, and Trump has gone from two to three percent, we hope to get to four percent this year. He has made faster economic growth a centerpiece of his economic agenda.
You have talked about how America’s young people seem to be in the dark, not just about technical economic issues, but in understanding the world and world history. That’s a depressing thought.
I don’t know if it’s unique to the Millennials, but there’s a sense of entitlement among young people. Look, I’m the father of a couple of Millennials, so this has been a bit of a spoiled generation. One of the mistakes we make as a society is that we need young people working at an earlier age. There’s no better way to prepare for life than to get a job when you’re 15, or 16, or 17 years old, and learn how to show up for work on time, learn how to run a cash register or whatever it might be.
It troubles me that Americans are starting to begin work at a later age. I’ve looked at the economic studies on this. One of the predictors of how well people do in terms of their earnings over their life is to look at when they started work. If you start working at 18 and I start working at 13, all else equal, I’m going to have higher success, not from the money that I make but from the skills that I learned in those five years. Look, here’s the thing that I think a lot people don’t understand: the most important skills you learn are not the stuff you learn in school, it’s the stuff you learn on the job.
Despite that though, you are optimistic about America’s future?
I am. Every statistic about the economy is pointing north, whether it’s business confidence, business investment, or small business optimism. Unemployment is low. Our problem is not too many workers but too many jobs, which is a nice problem to have. I think you’re going to see a lot of money from abroad flowing into the United States, at least for the next three or four years. I think that we are going to see a big boost in incomes.
I said in an interview a couple weeks ago that the most important measure for Trump in terms of getting reelected in 2020 is not the stock market, not business optimism and not even necessarily the growth rate. It’s going to be whether middle-class Americans feel like they’re more financially secure, and their lives are better. That’s why those bonuses from the Trump Tax Cut are very meaningful.
You’re a Mid-Westerner by birth but a long-time denizen, if we can say, of Washington, D.C.…
The Swamp. Yes
So, you know “The Swamp” probably about as well as anyone. Are we being governed by people who have really lost touch with what most Americans are experiencing?
One thing I’ve really developed is an undying respect for the ingeniousness and brilliance of our Founding Fathers. They believed that the power should be in the states, that it should not be concentrated in Washington. The states should compete with each other, and be, as [U.S. Supreme Court Justice Louis] Brandeis said, “laboratories of democracy.” They would learn from each other about what works and what doesn’t. Which is why I’m surprised in Minnesota you haven’t learned that right-to-work laws work very well in terms of more jobs.
The concentration of power in Washington is a very negative thing, and it’s good news that the American people are rebelling against it. It was the theme that Trump used to close the argument at the end of the campaign.
Did you know that three of the five wealthiest counties in America are in or around Washington, D.C.? That tells you everything, doesn’t it? That tells you everything about how corrupt Washington is. I live in the swamp. I’m a swamp creature. We don’t produce anything. All we produce is rules, regulations, agencies, bureaucrats and taxes. We’re getting rich at the expense of the rest of the country, and you know what? The rest of the country kind of caught on to it, and they were very hostile to what was going on in Washington.
I’ve written about the catastrophic ongoing tragedy in Venezuela, which could have been one of the world’s richest countries but has descended to the inevitable endpoint of socialism. You can look at North Korea, the history of the Soviet Union, East Germany—any historical instance you want to choose— and conclude that socialism is an unmitigated disaster.
This reminds me of something. One of the great things in my life is that I became great friends with Milton Friedman when he was in his 80s and 90s. Milton was probably the greatest economist of the 20th century. He used to say that the enduring lesson of the 20th century is that socialism is a failure and capitalism is a success. Then he would say that even though everyone agrees that capitalism is a success and socialism is a failure, all our American politicians keep saying, “We just need a little more socialism.”
I don’t know if it’s the politicians, or the schools, or what it is, but that message seems to resonate with a lot of Americans including a frighteningly large number of young Americans.
You’re absolutely right. Young people are uninformed, but I think once they get a taste of how the world works, and once they start paying taxes, and aren’t coddled in school, their attitudes will change. It’s happened with every generation. One thing that worries me about this new generation is this idea of safe spaces, that they’re protected from the reality of the real world. I think that’s a very dangerous thing because we’re not preparing them for life. Life is not a safe zone. Right?
And there’s a broader point. Peggy Noonan, who writes for The Wall Street Journal, puts it very well when she says that young people seem to think they have a constitutional right not to be offended. Free speech allows me to say things that might offend you or that you disagree with.
And vice versa.
Exactly. When I talk to kids, I say, “You don’t have to agree with everything I say. You shouldn’t agree with everything I say. You have your own mind, but you should be open-minded to things that you might not believe in and you have to make your own decisions about what’s right and what’s wrong, and what makes sense and what doesn’t.” This idea that everybody has to march to the same drummer and that I can’t say anything that could possibly offend your sensibilities is ridiculous. It’s a real danger, because it’s an affront to the whole idea of free speech.
I don’t want to be alarmist about it, but it seems to me that we’re seeing a real totalitarian impulse rearing its head on the left.
That’s a good point. Again, this is not original to me, but I read somewhere that this could be the first generation in a long time that wants less freedom not more freedom. Doesn’t that cheer you up?
I think there’s no doubt that this totalitarian impulse is manifesting itself. The only asterisk I would add is I’m not sure they want to limit their own freedom. I’m not sure that they have thought that through.
Right. I think it’s a good point, because they’ve grown up with the internet. Do they want the government to regulate the speech codes on the internet? I don’t think they’ve really thought through what a lot of these things would mean. It really does lead to a 1984-type of big brotherism where everything is regulated, your speech, your looks, your behavior. That is not a path that we want to go down as a nation.
It seems ironic to me that the very same people who will tell you over and over again that President Trump is a fascist are the ones who want to give more power to the federal government.
Nobody understands what fascism is. I mean, first of all, if you look at fascism as someone who tells you that you can accomplish things that are impossible, they’re demigods. Wait a minute, we just had a president who said he could stop the rise of the oceans. I mean, who’s the fascist demigod here? I mean, Barack Obama has a lot of characteristics that could be considered a lot more fascistic than Donald Trump.
Like the issuance of unconstitutional executive orders, which he did on a number of occasions.
Barack Obama didn’t get passed virtually a single bill in his second four years in office. Everything he did was through the executive orders, and Trump has that tendency, too. Separation of powers is the genius of our federal system, and we’re moving away from that. If liberals have control of the court, they want the court to make the decisions. If they have control of the legislature, they want the legislature to make the decisions. If they have control of the White House, then the White House should make the decisions.
It troubles me that the modern-day left believes—they truly believe—that the end justifies the means. So, because they have virtue on their side, whatever they can do to get to that point is acceptable because they are virtuous people. That’s a really dangerous thing to believe.
Stephen Moore, who formerly wrote on the economy and public policy for The Wall Street Journal, is the Distinguished Visiting Fellow, Project for Economic Growth, at The Heritage Foundation. He is a founder of the Club for Growth.