In an article written 10 days after President Donald Trump’s election victory, I commented on the drop in the price of gold, which was mirrored by a spike in the dollar index. I surmised that the markets were signaling optimism about our country’s prospects in a Trump presidency.
In retrospect, we can see that the dollar index peaked and the price of gold bottomed just one month later, even before Trump took the oath of office. (Click on the 2Y options on both charts to see this most vividly.) In fact, today, after one year of the Trump presidency, the price of gold is virtually unchanged from where it was on Election Day 2016.
What does all this mean? I would interpret the post-election spike in the dollar and fall in gold as reflex reactions signifying relief that Hillary Clinton was not going to be president. However, after that initial euphoria wore off, sober investors around the world began to sense that a President Trump, handicapped by a narrow and fractured Republican majority in Congress and Trump’s own bull-in-the-china-shop style, might not be able to accomplish much.
Assessing America’s economic situation in January 2018, Trump has had a successful first year. As I wrote a decade ago, presidents can’t just march into office, flip a switch, and change long-established trends. Sometimes their success or failure is baked into the cake by conditions they inherit. That is why, although President Barack Obama’s wrongheaded economic policies produced a shockingly weak economic performance, he didn’t deserve all of the blame. The trend toward slower economic growth was in place long before Obama became president.
In defiance of the long-term trend toward slower economic growth, President Trump has managed to boost growth. The United States is about to experience its third consecutive quarter of at least 3% growth. That is something that never happened during the eight years of Barack Obama’s presidency.
What has Trump done to help our economy grow? Initially, it was simply the change in tone and attitude between the pro-business Trump and his anti-business predecessor. Under the ideologically anti-capitalist Obama, business lived in fear and anxiety, never knowing when Team Obama would launch its next anti-business initiative. Not since Franklin Roosevelt had there been such overt hostility to wealth creators in the White House. With Trump’s election, the paralysis that had gripped business during the previous eight years lifted. Businesses no longer had to fear the arbitrary imposition of suffocating regulations.
In terms of specific policies, what has Trump done?
First, the president has kept his campaign promise to reduce stifling and costly overregulation. After signing an executive order last January directing federal agencies to rescind two regulations for each new one promulgated, the surprise was to the upside: The Trump Administration actually revoked or scaled back 67 regulations and only added three.
Second, in the area where Trump seems to hold to the most unsound economic ideas – trade – it turns out that his bark has been worse than his bite. Trump has backed off from his fiery rhetoric about blowing up NAFTA and now seems committed to fine-tuning this economically vital trade agreement.
Third, after months of talking about a tax cut, Trump actually achieved passage of a major tax reform bill last month. The implications of this accomplishment are enormous. Trump proved that he is capable of working with instead of against Congress. The happy result: a tax reform bill highlighted by a 40% reduction in the stupidest, most economically depressive (not to mention ethically challenged) tax in America – the tax on corporate profits. By allowing our country’s wealth creators – both individuals and businesses – to keep more of the money they earn, prospects for economic growth and job creation are distinctly rosier than before.
Despite the encouraging economic news, the largely unchanged market prices of the dollar and gold indicate that there has been no fundamental change in our country’s long-term economic outlook. Trump’s achievements are noteworthy, but he hasn’t made a dent in our biggest economic problem – the ongoing inability of the federal government, regardless of who sits in the White House, to rein in spending and operate on an economically sound basis. That systemic problem appears intractable. Nevertheless, faced with those headwinds, what Donald Trump has managed to accomplish economically so far is highly commendable. His first-year economic record deserves at least a B-plus.