Economy emerges as bright spot for Trump

Economy emerges as bright spot for Trump
© Getty Images

The economy is emerging as a bright spot for President Trump as he struggles to move his congressional agenda amid a series of controversies.

The S&P 500 is up more than 12 percent since Election Day, unemployment has reached a 16-year low and economic growth in the coming year is expected to reach 2.3 percent, more robust growth than the 1.6 percent it grew in 2016. 

Trump sought to play up his handling of the economy again on Friday at an event to end a week meant to highlight his efforts on legislation to fund new infrastructure projects across the country.

ADVERTISEMENT
“We are here to think big, to act boldly, and to rise above the petty partisan squabbling of Washington, D.C. We are here to take action. It’s time to start building in our country, with American workers and with American iron and aluminum and steel,” Trump said in a speech at the Department of Transportation.

Trump has often gotten in his own way when it comes to publicizing his handling of the economy.

This was supposed to be the administration’s “infrastructure week,” but it was almost entirely overshadowed by the appearance by fired FBI Director James Comey at the Senate Intelligence Committee.

The controversy surrounding Comey’s firing has led to a new drop in the polls for Trump, whose approval rating in the Real Clear Politics average is just 39 percent, with 55 percent expressing disapproval.

After James Comey’s testimony eclipsed Trump’s planned infrastructure week, he and first daughter Ivanka Trump will embark on a roadshow this week highlighting workforce development and job creation in the Midwest, including new German-style apprenticeship initiatives.

Ivanka Trump told reporters she hoped to “raise awareness about the fact that there are important and very viable and respectable career paths outside of a traditional four-year college experience."

On the economy, Trump’s figures are better, which suggests he’d be wise to focus more of his time on touting them.

In the RCP average, he holds a 44.3 percent approval rating on the economy, with 47.8 percent expressing disapproval.

While he’s still underwater, the numbers could provide some optimism in the White House, as could Gallup polls that have found that Americans have a positive outlook on the economy and where it’s headed for only the second time since the Obama presidency kicked off.

That’s not to say all is rosy for Trump on the economy. 

Trump ran as a businessman who would enact economic policies that would benefit the private sector, and the stock market has been driven up on the idea that regulatory reform and huge tax cuts are coming. If they fail to materialize, it’s possible those gains could roll back.

“I think a lot of the reactions are based on expectations of a future policy agenda, and the extent to which businesses and investors are optimistic hinges on their perceptions of the likelihood of that policy agenda passing,” said Michael Strain, an economist at the conservative American Enterprise Institute. 

At this point, it’s unclear what, if anything, Congress will accomplish on taxes.

Tax reform, for now, is being held up by work on repealing and replacing ObamaCare.

Because of the budgetary rules that Republicans in Congress are using to pass their ObamaCare legislation and tax reform, the GOP needs to conclude work on healthcare before it can move on to tax reform.

If and when they do get to tax reform, there will also be challenges — including over whether to include a border-tax mechanism backed by Speaker Paul RyanPaul RyanWant bipartisan health reform? Make the debate honest again Ex-CBO directors defend against GOP attacks on ObamaCare analysis Ryan: CBO's healthcare estimate is 'bogus' MORE (R-Wis.) that is opposed by many business groups.

Given Trump’s anemic poll numbers, he has less leverage with Republicans, and Democrats have almost no reason to work with him, which raises questions about whether his agenda is going anywhere.

And even if tax reform becomes law, it might not lead to the kind of growth the Trump administration is promising if it blows up the deficit.

Some economists also worry that Trump's goals of lowering immigration and to getting tougher with trading partners could hurt the economy.

“It can overwhelm whatever benefits there may be in the Administration’s taxing and spending proposals,” wrote George L. Perry, a senior fellow for Economic Studies at the left-leaning Brookings Institution. He called Trump’s policies in those realms “lose-lose.”

Another problem Trump faces is that he set very high, clear expectations on the economy during his campaign, promising better trade deals, resurgent coal and manufacturing industries and more jobs

“I think expectations for his ability to do those things are pretty high. I expect that as the months turn into years, some of the folks who voted for him will be disappointed,” said Strain.

Even if macroeconomic conditions stay on their positive path, he added, “that doesn’t mean that former factory and mining towns are on the same trajectory.”

There has been some good news on mining for Trump.

The Bureau of Labor Statistics noted in its latest job report that “employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.”

At any rate, the main thrust of where the economy by the next election cycle may depend more on outside events such as weather and war than Trump.

“In general, there’s a tendency to overstate the role of the president in shaping the economy,” noted Strain.