“If the unlikely event happens and Trump wins, you will see a market crash of historic proportions.” Who made this prediction? Was it Democratic economic eminence Lawrence Summers, or perhaps New York Times columnist Paul Krugman?
Actually Summers concluded that if Donald Trump “were elected, I would expect a protracted recession to begin within 18 months.” In Krugman’s case, he told his flock after Trump’s win that “We are very probably looking at a global recession, with no end in sight.”
So who predicted a stock-market crash? It was none other than financier and former Obama administration official Steven Rattner. Of the view that Trump’s economic policies associated with economic contraction, he predicted a market correction that foretold contraction. The DJIA was trading around 17,000 when Rattner spoke confidently versus over 27,000 today.
Notable about this is that there’s nothing wrong with being wrong. If the future were easy to predict, the very rich Rattner would be worth tens of billions. Also, some of Trump’s pre-election rhetoric (particularly about trade) was surely cause for concern. It still is.
Yet as time passed, it’s not unreasonable to point out that Trump’s sometimes incendiary economic bluster didn’t square with his actions. This is something the self-styled sophisticate in Rattner should have keyed on ahead of even the possibility of Trump being elected. Precisely because presidents aren’t dictators, precisely because Congress, the Senate, the Supreme Court, and fifty somewhat autonomous U.S. states exist as checks on the yearnings of presidents, their power to force massive change is very restrained.
At which point Trump, to his credit, moderated. Though the tax legislation he signed wasn’t big or bold enough, and though it didn’t reduce taxes enough on people like Rattner who have the most unspent wealth to invest in new ideas, Trump did sign tax-cutting legislation. The shame here arguably lay with a Republican-controlled Congress that talks a big game about economic growth, but has long been afraid of reducing the tax burden on those most capable of creating growth through their enterprise and investment: the rich. Still, it’s not unreasonable to say that if presented with a more expansive, more-growth oriented tax cut, Trump would have signed it.
The idea behind the obnoxious conceit that is regulation is that the very individuals who couldn’t get jobs in regulated industries should have the right to control those industries from the Commanding Heights. Don’t worry, it gets more ridiculous. It’s assumed that the individuals who didn’t rate jobs in the industries regulated have the skill to see around the proverbial corner in order to detect trouble spots for businesses ahead of time. Try not to laugh. The shame is that regulated businesses can’t. Regulation is a huge tax on productive commercial activity, but one that fails as a rule. In Trump’s case, he’s been a ferocious de-regulator to the economy’s benefit.
On the question of foreign adventurism that frequently bleeds so much human and financial treasure, Trump’s been a skeptic. On matters judicial, rather than flying blind as past presidents have done (does anyone remember Harriet Miers), Trump essentially outsourced the nominating process to the Federalist Society.
On the subjects of China and trade, Trump’s rhetoric remains very disturbing. The best that can be said here is imagine how much better the economy would be, and how much higher market indices would be, had Trump not made China and trade such an issue.
Still, it cannot be denied that Trump proved many of his critics (including yours truly) wrong. He ran as a radical, talked that way at times, but has largely governed in frequently reasonable fashion. The speculation here is that if a President Rand Paul had Trump’s policy record, that libertarians would be broadly pleased.
Back to Summers and the establishment left’s intense skepticism about Trump, does anyone remember his routine lament during the Obama years about “secular stagnation”? Summers’s view was that “demand” was tapped out, and the economy had reached an insurmountable slow-growth plateau. Krugman had decided that “persistent shortfalls of demand” couldn’t be overcome with good policy. Sounding like Jimmy Carter in the 1970s (“I think it’s inevitable that there will be a lower standard of living than what everybody had always anticipated….the only trend is downward….”), the most prominent faces of Democratic economic policymaking had decided not long before Trump’s presidency that per Carter, Americans were going to have to accept a dimmer future.
This is important in consideration of what Rattner’s trying to sell us now. Not only did he swing and miss on the economic and market implications of Trump’s presidency, he’s trying to create the false perception that Trump inherited an economic boom. Sorry, but that’s not what Rattner was saying back in 2016. It’s also not what Summers and Krugman were saying. Not only were Trump’s policies going to destroy the U.S. economy, but that same economy had entered into a period of stagnation that policy couldn’t overcome. Rattner ignores all this. And then he just gets silly.
He claims Trump’s economy “amounted to nothing more than a continuation of the recovery engineered by President Barack Obama.” Ok, but implicit there is that as opposed to reversing Obama’s economic policies, Trump mimicked them to Rattner's delight. As opposed to pursuing policies that would lead to an “historic” market crash, Trump pursued policies that investors mostly liked.
It’s a reminder that when Rattner makes the laughable claim that Trump is wholly riding Obama’s coattails, he’s fibbing. At least twice. An economy that was supposed to collapse under Trump, was suffocated by “secular stagnation” before him. This was all very much known in lefty circles in 2016. The quotes from Rattner, Summers et al that confirm the previous truth are all over the internet. In suggesting Trump merely inherited what was already great, Rattner forgot that the internet is forever.
