Skip to main content

When U.S. President Donald Trump speaks at the World Economic Forum in Davos, Switzerland, this week, expect a lot of chest thumping. And why not? The times, economically speaking, are good. The United States has its lowest unemployment rate in almost two decades, a raging stock market, rock-bottom interest rates, low inflation and new tax cuts.

It's a "Goldilocks economy," economist Robert Samuelson points out. It's like "the late 1990s when growth was fast enough to create jobs but not so fast as to create sharply higher inflation."

A climate of uncertainty is supposed to be bad for the economy. No one creates more uncertainty than Goldilocks himself, the tempestuous Mr. Trump. But his fitful fluctuations don't seem to matter. Consumer and business confidence are at near all-time highs.

Mr. Trump's "America first" rants, in combination with his tax initiatives, are prompting companies to invest at home. Apple Inc. has announced a five-year, $30-billion (U.S.) investment plan. The Republicans' king-size corporate tax cut is increasing investment attractiveness for the U.S. while dimming it for competitors such as Canada.

Mr. Trump deserves some credit for the good times, economists surveyed by The Wall Street Journal say. The people agree. When he took office, 46 per cent of Americans rated the economy as excellent or good in a Quinnipiac University poll. Now, two-thirds do.

The media can squawk on and on, say Trump backers, about his shock talk, his boorish, unpresidential behaviour. But at the end of the day, what does that matter? What matters is that people are doing better where it counts: in their wallets.

Design has something to do with it. So does happenstance. Mr. Trump was elected on a populist wave that, he said, would spark great change. At Davos last year, everyone was wary, fearing the international economic order was under siege. But since that time the global economy has fared very well, while populism has been in retreat. Economic growth is up most everywhere. Brexit isn't turning out to be the threat it was feared to be. A trade war with China hasn't happened. France elected a devotee of globalization in Emmanuel Macron while pushing back Marine Le Pen's nativism.

While Republicans contend Mr. Trump deserves more credit for the economic surge, others cite good fortune and good timing.

As Mr. Samuelson, writing in The Washington Post, points out, "Presidents have only limited influence over the business cycle, which is heavily driven by outside events, past policies and the Federal Reserve."

Lawrence Summers, a treasury secretary under president Bill Clinton, says it's the global economy that has lifted U.S. prosperity. Other stock markets have outperformed America's. Growth forecasts are high not only in the U.S. but all over the world. If the U.S. was the driver of the good times, the dollar would be strong – it isn't.

"We set in motion what we're seeing now," says Obama administration economist Lisa Cook. In Mr. Obama's last year, job growth was a bit better than in Mr. Trump's first. But wage growth was laggard in the Obama administration and still is.

On trade, Mr. Trump took his country out of the Trans-Pacific Partnership, which most economists regard as a foolhardy move. What he will do with the North American free-trade agreement remains to be seen.

The Trump tax cut, his biggest economic initiative, helps some in the middle class for a limited period but is a bigger boon for the wealthy. If income inequality is a central problem of our times, the tax cut is more likely to exacerbate rather than alleviate it.

For the near future, the cuts will likely spur economic growth. But what of the longer-term costs? Few economists believe the cuts will create enough growth and tax revenues to ward off dangerous new deficit and debt levels.

The President's deregulation push could come with heavy costs to banking stability and the environment. Slashing science and research and development budgets is hardly healthy for long-term innovation. Reviving the coal industry might be good for running-dog capitalists but is hardly the way of the future.

So while Mr. Trump, with some basis, will be merrily blowing his horn in the Swiss Alps while his Goldilocks economy looks good for the short term, it's best not to look too far down the line. The gold could turn to something else.

Sources tell Reuters Canada is increasingly convinced the U.S. will pull out of NAFTA, and sources in Mexico say that country will likewise quit the deal if Trump announces plans to withdraw.