Within a day after Donald Trump’s triumphal visit to Indiana, where he claimed credit for “saving” 800 jobs at a Carrier factory, the Department of Labor released its first monthly unemployment report since his election victory — and one of the last that will come out during the presidency of Barack Obama. Together those two events illustrated the contrast between a real strategy for economic growth and the dubious gambit of a Twitter addict.
During his presidential campaign, Trump repeatedly warned that if he became president, companies moving U.S. manufacturing plants abroad would suffer punitive tariffs of 35 or even 45 percent when they tried to sell their overseas products here. More than once he specifically mentioned Carrier Corp., which builds cooling and heating units. After post-election conversations with company officials that included his running mate, Indiana governor Mike Pence, Trump declared that he had fulfilled his promise by “saving” those Carrier jobs.
Yet instead of punishing Carrier for taking most of its Indiana jobs to Mexico, Trump and Pence had actually rewarded the company with $7 million in state tax booty and guarantees of a big cut in its federal tax rate — plus any additional promises concerning the billions in Pentagon contracts held by Carrier’s parent company, United Technologies. Spending other people’s money, Trump did precisely the opposite of what he had promised — but appeared heroic for at least one news cycle.
The next day came the latest proof of the steady success of Obama and his economic team, with yet another monthly tick upward in job growth and another tick downward in the unemployment rate — now at 4.6 percent, its lowest point in almost a decade. Even with all the caveats about slow wage growth, reduced workforce participation, and continued manufacturing losses, the revival of the American economy under Obama is an enormous achievement and the envy of the world. Yet it is all too easy to imagine the voters who supported Trump dismissing what this president has accomplished.
Among the achievements that led to America’s low unemployment rates was the preservation of well over a million auto industry jobs, in the same battleground states where Trump carved his excruciatingly narrow win. When Obama decided to bail out auto, he faced enraged opposition from Republicans claiming to defend “free market” principles. They now praise Trump for wielding government power to cajole and bully a private company so he can claim to have saved well under a thousand jobs.
Even if political principles don’t matter, however, the arithmetic of this comparison doesn’t favor Trump (and never mind the craven Pence, an outspoken supporter of NAFTA and every other trade agreement when he was in Congress). Still Trump will insist that he delivered, and his gullible supporters will believe him — at least for a while.
Over the past year, Trump has uttered lots of other promises that will be much harder to fake than the Carrier deal. He vowed to create 25 million jobs, rebuild the nation’s infrastructure, and increase military spending — without increasing the deficit. He and his supporters insist that he can fulfill those outsized pledges because he is something entirely new, a GOP populist who cares about working Americans.
To accomplish even half of what he has pledged, Trump will have to overcome more than a century of American economic history.
During the years since 1900, unemployment has consistently increased under Republican presidents, while employment has increased under Democratic presidents — as NYU professor James Gilligan proved several years ago with data from the National Bureau of Economic Research and the Bureau of Labor Statistics.
The partisan contrast is stark enough for a Trump voter to understand: Whenever a Republican president left the White House, unemployment was higher than when his term began, while the opposite was true whenever a Democratic president completed his term. In the most recent sequence, when George W. Bush took over from Bill Clinton, the unemployment rate was at 4.2 percent (defined by economists as close to full employment); when Bush left and Obama took over, the unemployment rate was 7.8 percent and rapidly rising; and now when Obama leaves he will bequeath Trump a jobless rate of 4.6 percent, perhaps even lower.
Despite his populist rhetoric, what Trump proposes to do to the economy is scarcely different from what all of his Republican predecessors have done. With the Republicans in Congress, he intends to deliver gigantic tax cuts to the wealthiest households in the country. Even his infrastructure plan is actually another enrichment scheme for the super-rich, designed to attract investors by granting them an 82 percent tax credit. But only projects that can deliver a return by charging tolls or fees will draw such investments, while trillions of dollars in desperately needed projects will languish without public funding.
While Trump’s proposed corporate tax cut may well bring home money for business investment, the overall history of tax cuts as a Republican economic panacea is worse than disappointing. So far every signal suggests that he will pursue the same plutocratic approach favored by all presidents of his party, only more extreme. The “success” of the Carrier deal will be long forgotten if and when he gets the same bitter results.
IMAGE: President-elect Donald Trump speaks at a rally in Cincinnati, Ohio, December 1, 2016 as part of “USA Thank You Tour 2016”. REUTERS/William Philpott