NDN Blog

Invite: Thur, July 18th - "Patriotism, Optimism"

Over the past year or so Simon has been making a big argument about the past and future of the center-left in America.  Called "Patriotism and Optimism," it makes the case that America is not in decline and is in fact doing as well as it has in any point in its history. It is meant to be an explicit rebuttal to the core argument Trump is making about America and its decline, an argument which is malevolently selling America and its people short every day. 

This primary way this argument has made itself into the world is through a 45 minute long Powerpoint deck, which has been seen in dozens of showings over the web and live in person to policy makers here in Washington and around the country. Our next showing of the deck will be Thursday, July 18th from 12:00pm to 1:15pm at our new offices at 800 Maine Avenue SW, Washington, DC. Lunch will be served. You can RSVP for the event and learn more here. For background before the showing, feel free to check out some related readings below.

Key Background Readings On "Patriotism and Optimism"

The Case for Optimism: Rejecting Trump's Poisonous Pessimism, Simon Rosenberg, Medium, 6/2/17. In an essay that originally was published on Medium, Simon argues that the great rationale of Trump's Presidency  –  that America is in decline – simply isn't true, and must be challenged more forcefully.  This is the piece that spurred the creation of the presentation. 

Chin Up, Democrats, Simon Rosenberg, US News and World Report, 1/20/17. In his column Simon argues that Democrats should have pride in their historic accomplishments and optimism about the future of their politics. This one is very relevant to the presentation itself. 

A Center-Left Agenda for the Trump Era - Simon Rosenberg, US News and World Report, 12/9/16.  In the early days after Trump's election Simon layed out a possible agenda for the Democrats centering on prosperity, security, shoring up the American led liberal order and ambitiious efforts to reform our political system. 

Additional Readings

Some Thoughts On the Caravan - By Simon Rosenberg, Medium, 10/24/18.  The Caravan, composed of 7,000 poor, unarmed, mostly Honduran Central Americans, poses no threat to the US, and illegal border crossings continue to be way down. Some thoughts on what Democrats should do to respond to Trump's farcical attacks and terrible policies.

Are We Better Off Under Trump? The Short Answer Is No - By Simon Rosenberg and Chris Taylor, NDN, 10/18/18.  Most measures of the US economy are worse today than when Trump took office. Worse still, the President’s policies have made it very challenging to manage the next recession or global economic downturn.

Challenging Trump's Tariffs - An Ongoing Series - By Chris Taylor, 10/17/18.  In a new series challenging Trump's tariffs, we argue that the President's trade policy is illegal, recklessly ignorant, damaging to the US economy, and historically unpopular. Congress must step up and rescind them in the coming months. 

Trump's Immigration Strategy Is Failing - By Simon Rosenberg, NBC News, 8/6/18.  Almost nothing the President has done on immigration and the border has worked; expect more extreme policies as the elections approach. 

Congress Must Debate The Weakening of Global Order - By Simon Rosenberg, NBC News, 5/10/18.  Few presidents have inherited a world or a nation in which more was going right. Trump seems determined to undo it all.

The Pernicious Politics of Oil - Simon Rosenberg, US News and World Report, 12/16/16.  Petro-powers are challenging the global order, and the next president seems uninterested in stopping them.

An Enduring Legacy: The Democratic Party and Free and Open Trade - Simon Rosenberg, Huffington Post, 1/24/14.  The global system created by Presidents FDR and Truman has done more to create opportunity, reduce poverty and advance democracy than perhaps any other policies in history. 

US Economy And Trade Policy

NDN has written extensively on trade policy under the Trump administration and the state of the economy more broadly under the past three Presidents. Below you can find economic and political analysis of Trump's unprecedented experiment in protectionism since 2018, the state of the Trump economy compared to that of Obama, and the effect of Trump's 2017 tax cuts.

Trade Policy

NDN Applauds New Democrat Coalition Letter On Section 232 Auto Tariffs - Chris Taylor, NDN, 2/13/20 - NDN is pleased to pass along a letter released today by the New Democrat Coalition that strongly criticizes the President for withholding the Section 232 report on potential auto tariffs that the President is legally required to release to Congress.

The Threat Of Trump's Trade Agenda - Chris Taylor, The Washington Monthly, 1/23/20 - In a new piece for the Washington Monthly, Chris Taylor examines how Democrats should construct their new trade agenda, and challenge the President's reckless trade policies, now that the USMCA has been successfully passed. You can also find an excerpt of the piece posted to NDN's website here.

Congress Must Have A Robust Post-USMCA Trade Agenda - Chris Taylor, NDN, 1/7/20 - It is critical that Congress doesn't wash its hand of trade policy now that the USMCA debate is over, because the President's larger, destructive trade strategy continues to erode the global rules-based trade system.

Trump Concedes The Trade War To China - Chris Taylor, NDN, 12/17/19 - Trump’s trade deal with China offers no details on the structural reforms that were the entire point of the trade war. Instead, all the US receives is the promise of agricultural exports that are barely above the pre-2017 trend and could very easily not take place.

America's Experiment With Protectionism Is Failing - Chris Taylor, NDN, 9/18/19 - America’s great experiment with protectionism hasn’t revived manufacturing or reduced the trade deficit, but instead has destroyed over 300,000 jobs and cost the average household $1,000.

New Study Shows America Embracing Free Trade, Rejecting America First - Chris Taylor, NDN, 7/29/19 - New polling data from Pew shows widespread, and growing, support for free trade among Americans. Democrats in particular have become a fundamentally pro-trade party, saying that free trade agreements are good for the US by a 58 point margin.

Democrats Must Demonstrate Greater Leadership In Challenging Trump's Ruinous Trade Policy - Simon Rosenberg, Twitter, 5/8/19 - Democrats should be more aggressive in challenging Trump’s tariffs and trade policies given the failure of those policies to achieve their objectives and growing discontent with them around the country.

Challenging Trump's Tariffs - An Ongoing Series - Chris Taylor, NDN, 2/14/19 - In a new series challenging Trump's tariffs, we argue that the President's trade policy is illegal, recklessly ignorant, damaging to the US economy, and historically unpopular. Congress must step up and rescind them this fall.

Trump Economic Record

Trump's New Budget Proposal Is Incoherent Yet Immensely Dangerous - Chris Taylor, NDN, 2/10/20 - Three years of economic policy under the Trump administration are well represented by just a few words: incoherent yet immensely dangerous. It is fitting then that the budget proposal released by the administration today continues this trend.

Trump's Make-Believe Economic Record - Chris Taylor, NDN, 2/5/20 - It is simply not true that Trump has overseen an economic revival since 2016, and actually almost every macro-economic trend has declined to some extent under Trump.

New Data Highlights That Trump's "Greatest Economy Ever" Wasn't Actually So Great In 2018 – Chris Taylor, NDN, 8/21/19 - Updated data on growth, jobs, and investment reveals the extent of Trump’s failed promises on the economy. There is little evidence that Trump’s tax and trade policies boosted investment, and both economic and jobs growth either declined or remained constant from 2017 to 2018.

Beyond The Headlines, The Economy Continues To Weaken - Chris Taylor, Medium, 5/7/19 - The new narrative that the economy is back to growing strongly is significantly flawed, and is largely based upon two economic reports whose headlines were very strong but whose underlying data revealed continued weakness in the economy.  

Weekly Notes On The Economy - Chris Taylor, NDN, 5/7/19 - Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Tax Policy

Trump's Tax Cuts Have Failed To Deliver On Their Promises - Chris Taylor, NDN, 10/30/18 - Trump’s tax cut promised to boost growth by strengthening the labor market and investment, but today both metrics look very similar to their pre-tax cut trend. Instead, the deficit has surged to unprecedented levels and rapidly increasing interest rates are hurting ordinary Americans.

Beyond The Headlines, The Economy Continues To Weaken

This essay originally appeared on Medium.

Over the past two weeks, a new piece of conventional wisdom has taken hold in the media and the White House that the economy is strong again and concerns over growth earlier this year were unfounded. Indeed, Trump likely ordered a significant escalation of his trade war with China based upon his perception that the economy was doing well enough to handle it. The problem, of course, is that this narrative doesn't really appear to be true. It is largely based upon two economic reports whose headlines were very strong but whose underlying data revealed continued weakness in the economy. 

First, the unemployment rate in April hit its lowest level in five decades. While this headline sounds extremely positive, the reason unemployment fell was because 490,000 workers left the labor force after being unable to find jobs. According to the Census Bureau survey that the unemployment rate is derived from, total employment in April actually fell by over 100,000, and 300,000 fewer people have jobs today than they did in December 2018

Second, real GDP rose by 3.2% in the first quarter, far above market estimates in the low twos. Again, the report appears to be very strong, but the underlying data is actually poor. GDP rose significantly because of temporary, one-time boosts from inventories and net exports. The problem is that because these factors were very strong in Q1, they will actually subtract from growth in the rest of the year as firms reduce their inventory levels to deal with slowing demand and net exports fall after they had a large, one-time build-up ahead of the expected imposition of tariffs in March. Meanwhile, the core elements of growth that will affect GDP over the rest of the year, consumer spending and business investment, actually fell to their lowest levels since 2013 in Q1, meaning that growth will likely be around 2% or worse for the rest of the year.

Furthermore, closely-watched reports covering US manufacturing and services production saw major declines in April, consistent with the underlying data in the jobs and GDP reports. Last month, US manufacturing output declined to its lowest level since October 2016 and services production fell to its lowest level since August 2017, while the employment gauges in both reports were near their lowest levels of the past 2 years.

Rather than marking an unexpected uptick in the economy, data over the past month has only confirmed that economic activity continues to slow, as Trump's trade policy harms US manufacturers and farmers and his tax cut fails to provide the sustainable lift to investment that was promised. All of this makes his threats of additional tariffs against China more economically and politically risky, and we will continue to oppose these policies in the days ahead. 

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump Is Beginning To Fold On His Trade Agenda

Since Trump began implementing tariffs on a wide range of nations in March 2018, his commitment to actually seeing through his trade agenda, even in the face of economic and political harm to himself, has been questioned. Indeed, it was widely reported that Trump pressured his economic advisers to wrap up negotiations to help the economy when the stock market suffered a large decline at the end of 2018. In recent weeks, however, clear signs have emerged that Trump is beginning to fold on achieving real concessions in his trade conflicts, in the face of economic and political costs ahead of the 2020 election. The first, and extremely significant, move in this direction by Trump was unilaterally cancelling the March 1 deadline for higher tariffs on Chinese goods , even though no concessions had been made by China. The tariff escalation if a deal had not been made was promoted by the Trump administration as creating significant leverage on the Chinese because of its significantly harmful economic effects, and yet it became clear that Trump was not willing to incur his own domestic economic hardship and simply backed down. Second, new reporting over the past several weeks has shown that US demands for Chinese reforms continue to be watered down, whether that be accepting weaker Chinese IP protections for pharmaceuticals than exist in the US or largely abandoning demands for China to reform industrial subsidies to state-run enterprises.

Why has Trump changed his tune so significantly, when his promise to be tough on America's trading partners was such a big part of his campaign? Probably because he has begun to encounter significant political and economic opposition at home that has him fearful for his 2020 election hopes. On the political front, his trade agenda has encountered increasingly strong opposition from both Democrats and Republicans. Over the weekend, Republican Sen. Chuck Grassley said that the USMCA was dead in Congress unless Trump repealed his steel and aluminum tariffs, while bipartisan bills giving Congress a check on the President's national security authority for imposing tariffs are moving through the House and Senate. On the economy, meanwhile, Trump has seen the large negative effects on the stock market and business confidence that his trade wars have created, and realizes that a strong economy provides probably the only potential path to a 2020 victory. As a result, he's unwilling to repeat the stock markets declines of late 2018, which were caused in large part due to fears of escalating trade conflicts with China and the EU. For all of the bluster and attacks on key US allies, then, what has Trump's trade strategy achieved for Americans? A weakened manufacturing sector and the loss of thousands of jobsseverely worsened relations with our allies in Europe and Asia, and few if any meaningful trade concessions. You can read more about NDN's work challenging Trump's tariffs here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

While Trump Blames The Fed, The Real Cause Of The Growth Slowdown Is His Trade Policy

On Sunday, Trump once again blamed the Fed and Chairman Jerome Powell for the economic slowdown that has intensified since late 2018, and that will likely see 2019 growth close to 2% rather than the 3%+ promised by the President. If Trump actually wanted to find the culprit for this deceleration, however, he would be wise to take a look in the mirror. Indeed, Trump's protectionist trade policy has created enormous business uncertainty around the world and has led to a steep fall in global trade, causing a decline in both US and global growth. Last week, the IMF downgraded 2019 global growth from 3.5% to 3.3%, and similarly reduced their US growth projection for this year from 2.3% to 2.1%. In their analysis, they cited increasing trade tensions as the top risk to global growth and wrote that a failure to resolve Trump's trade war with China and a potential one with the EU would cause a further economic decline.

Furthermore, CNBC's March Fed Survey saw a downgrade in expected 2019 US growth from 2.45% to 2.3% according to 43 market investors, who blamed global trade conflicts and slowing global growth for the slowdown. Finally, the WTO early this month projected that global trade growth would fall from 3% in 2018 to 2.6% in 2019, significantly below its 2000-2018 average of 3.8%. America has witnessed an unprecedented experiment with protectionist trade policy during the Trump administration, and the results of this experiment are now clear - significantly slower US and global growth, and a large hit to the stability of the rules-based global trading system. You can read more about NDN's work challenging Trump's trade policy here, and find our recent piece about the WTO's legal blow against Trump's tariffs here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

WTO Strikes A Legal Blow Against Trump's Tariffs

On Friday, the WTO issued a series of rulings that struck at the core legal justification for Trump's steel and aluminum tariffs. The administration had argued that countries can impose tariffs based upon their own interpretation of national security interests, and that whether there actually is a legitimate national security concern can't be arbitrated by international trade courts. In a case not directly involving the United States but clearly aimed at Trump's tariff policies, however, the WTO ruled that countries can't simply impose national security-based tariffs for any reason at all, but instead can only impose them when there are unexpected war-related dangers requiring urgent action that involve interactions between sovereign states. This ruling significantly weakens the arguments that Trump had used to justify the tariffs. They have been imposed upon economies including Canada, Mexico, and the European Union, which clearly don't present "unexpected war-related dangers" (and Mattis in 2017 even said the tariffs weren't needed by the US military for any defense-related activities). Furthermore, US steel and aluminum manufacturers have lost business to private foreign companies, and the vast majority of nations affected do not provide state support to their steel and aluminum industries, so Trump's tariffs also don't involve direct interactions between sovereign states.

As NDN has long argued, Trump's tariffs instead represent an extraordinary abuse of Presidential power, and their imposition violates both US and international law. This ruling only reiterates that the tariffs do not serve a legitimate national security interest, and Congress must now act to rescind this latest violation of Presidential authority. You can read more about NDN's work challenging Trump's tariffs here, and find recent Congressional action towards reining in the tariffs here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump Is More Like Maduro Than Any Democrat

This essay originally appeared on Medium.

In recent months, the Republican Party has toyed with a new electoral strategy heading into 2020: accuse Democrats of becoming radical leftists opposed to free markets and democratic institutions, and argue that they want to transform the country into something similar to the Maduro regime in Venezuela. In February, for example, Trump delivered a speech in Miami accusing his political opponents of wanting to impose Venezuelan-style socialism on the United States, while Press Secretary Sarah Sanders in March said that “Democrats are harassing the President to distract from their radical agenda of making America a socialist country.” The strange dynamic of this argument, however, is that the picture it paints of Democrats’ supposed economic unorthodoxy and disdain for the rule of law is far more reminiscent of Trump himself.  More so than any US President in the modern era, Trump has derided the American market-based economic system as robbing Americans and destroying US jobs, all the while trampling on the rule of law and seeking to intimidate his political opponents.

Let’s drill down a bit on the ways Trump is more like Maduro than any Democrat here in the US:

Anti-Market Economic Policies, Picking Winners and Losers - Trump has overseen what has become the most anti-market economic policy of any President in the postwar period. First, his unprecedented attacks on the global trading system have directly weakened the competitiveness of innovative American firms in an attempt to prop up his favored industries. The steel and aluminum tariffs have increased costs to automakers like Ford and GM by over $1 billion, and have led to aggregate job losses of over 400,000 net jobs. And have the tariffs led to the end of unfair trading practices against American steel and aluminum manufacturers? No, because the vast majority of those US imports come from Canada, the EU, and Mexico, all of whom haven’t engaged in dumping or subsidies to their domestic steel and aluminum producers. Trump’s tariff strategy is no different from if he enforced punitive taxes on American automakers and then gave government handouts to the steel and aluminum industries. Indeed, as a result of his tariffs, much of the agricultural industry is now reliant on government subsidies to stay afloat as their export markets have dried up.

Second, in his Miami speech Trump derided the Venezuelan government for its “power to decide who wins and who loses.” And yet Trump consistently interferes in the market and attempts to leverage government power to intimidate firms that he doesn’t like and help companies that he does like. Trump attacked GM’s decision to scale back US production as a result of elevated raw resource costs, and threatened to cut off GM’s access to completely unrelated electric car tax credits that are available to all US automakers. He threatened to unilaterally increase the shipping rates that the US Postal Service charges to Amazon, in an attempt to harm Amazon and Washington Post owner Jeff Bezos. Furthermore, Trump attempted to force electrical grids across the country to buy coal- and nuclear-generated electricity, even if the grids didn’t want to use those sources because they were more expensive. And just last month, he tried to pressure the Tennessee Valley Authority into buying more expensively priced coal-generated electricity from several firms that were owned by friends of the President. Time and again, Trump has refused to allow competitive markets to function, and instead has turned to the socialist strategy of using state power to advantage his allies and harm his enemies.

Third, Trump has overseen the most fiscally irresponsible budget in the modern era, at a time when the strong US economy requires the least fiscal stimulus. Orthodox economics says that debt-financed stimulus should be done during economic downturns and then deficits reduced during subsequent economic booms, so as to maximize the efficiency of borrowed money and reduce the debt burden on future generations. Trump has done the opposite of this. With unemployment under 5%, his tax cut and increased spending have sent deficits surging from 3.1% of GDP in 2016 to a projected 4.2% this year, negating much of the progress that Obama made in reducing it from 9.8% in 2009 to 3.1% in 2016. This level of budget deficit during good economic times is unprecedented in the United States. Indeed, since the end of the Second World War, the three largest budget deficits as a % of GDP while unemployment has been under 6% have been Trump’s deficits in 2017, 2018, and 2019 (projected). Similarly, disregarding fiscal sustainability has been a hallmark of the Maduro regime, which ran budget deficits of 20% of GDP and 15% of GDP in 2015 and 2014 that have played a major role in the country’s current hyperinflation.

Repudiation of Democratic Institutions – The area in which Trump might resemble Maduro the most is in his contempt for the rule of law and democratic checks and balances.  Maduro and his predecessor Hugo Chavez gained absolute power in Venezuela through state take-over of the free press, packing the independent judiciary with their own loyalists, transferring the power of the elected legislature to the executive, and imprisoning their political opponents. If those authoritarian actions sound familiar, it is because they are similar to the steps Trump has tried to take to consolidate his own power (albeit in a system with far greater checks to such abuses). Trump has attempted to delegitimize the free press as the “enemy of the people” in the eyes of Americans, applauded criminal assaults against journalists, threatened to disband specific courts that have made rulings he opposes, threatens almost weekly to lock up his political opponents, and used a blatantly made up national security emergency to bypass the elected Congress to build his border wall. In each of these ways, the actions of the Maduro regime to consolidate power are echoed by Trump in his attempted actions and rhetoric, while it is the Democratic Party that has taken the mantle of defending democratic institutions in the United States.

Furthermore, the President has attacked the independent governmental institutions that help manage the economy when they take actions that Trump doesn’t like. When the Federal Reserve was raising interest rates in a way that Trump thought would hurt his approval rating, he launched the most vocal attacks on the Fed of any President in decades. Meanwhile, Trump’s newest appointee to the Fed, Stephen Moore, is likely the most blatantly political figure appointed to the central bank in recent memory. In December 2018, Moore wrote an op-ed titled simply “Fire the Fed”, and he has consistently called for Fed Chair Jerome Powell to resign. Finally, Trump and his advisors have constantly attacked the Congressional Budget Office for supposedly making up economic data to hurt Trump, even though there is no evidence whatsoever of this activity. Major elements of Maduro’s economic policy in Venezuela have included a takeover of the central bank to dramatically increase monetary stimulus for political gain (leading to hyperinflation) and the packing of the independent statistical agencies with loyalists who doctored data to increase Maduro’s popularity. Here, Maduro seems much closer to Trump than to the Democratic Party.

As the 2020 election approaches, Republican attacks on the Democratic Party and its candidates as socialists and Venezuela-lite will undoubtedly escalate. But for all of their condemnation of anti-market and authoritarian impulses in Venezuela, their man in the White House is the greatest embodiment of such sentiments in modern American history. As is so common with Trump, this new line of attack is simply an attempt at misdirection from the real economic achievements of Democrats and Republicans over the past generation. Contrary to the arguments portraying Democrats as scary socialists, the Democratic economic approach has actually produced far better results than that of Republicans. Since 1989, four times as many jobs have been created annually while Democrats have been in the White House than when Republicans have been. Similarly, median income has on average fallen under Republican Presidents while it has risen under Democrats, and the budget deficit and uninsured rate have on average increased under Republicans while they have declined under Democrats. If Republicans want to find a party that has mismanaged the economy and adopted increasingly authoritarian ideas, they should look in the mirror.

Growing Recession Risks Could Make Trump Even Less Stable

In recent weeks, new challenges have emerged to the conventional wisdom that the US economy is largely doing fine. Growth is projected to significantly decelerate this year, with first quarter growth seen at only 0.4% by the Atlanta Fed and 0.9% by Goldman Sachs. Manufacturing output, a key leading indicator of economic activity, has fallen significantly over the past six months, and four major manufacturing indicators (ISM PMIMarkit PMIPhilly Fed, and Empire State Fed) now show US industrial activity at its lowest level since late 2016. Finally, the most widely trusted recession indicator in the financial markets - the yield curve - is now at its flattest level (indicating its highest recession probability) since 2008, and the NY Fed's recession model shows a 24% chance of recession in the next 12 months, an alarming reading considering that over the past 40 years there has always been a recession within 12 months when the model has reached 28%.

An economic downturn, accompanied by a loss in confidence in the economy among the public, could significantly harm Trump's chances in 2020. While the President continues to have the consistently lowest first term approval rating in the post-World War 2 period, it has been kept above disaster territory by relatively strong approval of his economic management. For example, March's Ipsos poll showed his net approval at -13, but his net economic approval at +6. If such a downturn were to happen, therefore, the bottom could easily fall out on his Presidency, and a serious primary challenge could be undertaken against the President. As a result, as the economy continues to weaken, we'll likely see a more unstable and increasingly erratic Trump, who will try ever harder to please his base with even more reckless policies in an attempt to hide the slowing economy.

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

With Growth Slowing, Trump Releases A Budget Devoid From Reality

This morning, the Trump administration released their budget request for 2020 and with it their economic projections for the next decade. Unfortunately, the document reads more like a Trump rally speech than a serious piece of economic literature, and contains projections at odds with virtually every independent analysis. The budget forecasts growth of 3.2% in 2019, even though the Fed, CBO, IMF, and every major bank (Goldman Sachs, JP Morgan, Morgan Stanley, and Bank of America for example) all project that 2019 growth will be 2.5% or less (the average 2019 projection for those seven organizations is just 2.2%). Even more implausible, Trump's budget forecasts that growth will stay at 3% and above through 2023. In reality, the IMF projects that US growth will be closer to 1.4% in 2023, while the CBO forecasts a growth rate of 1.7% in 2023. The administration's fiscal daydream doesn't stop here though. Much of the growth boost in 2018 came from sharply higher budget deficits that boosted aggregate demand (the deficit of 3.9% of GDP in 2018 was the largest deficit when unemployment was under 6% since 1950). Trump's budget, however, sees a budget deficit of 3.7% of GDP by 2023, compared to the CBO's current estimate of 4.6% in that year. What the administration is saying, then, is that they will have double the rate of growth in 2023 compared to CBO projections, while also having less fiscal stimulus than the CBO anticipates (stimulus that would presumably be necessary on an even larger level to achieve anywhere near 3% growth). 

Above all else, today's budget request is a desperate attempt to rewrite the economic narrative of the Trump presidency. Growth is slowing, not rising, and will likely hit its potential rate of 1.8% by 2020. This means that the President's promise that his tax cut would create sustainable long term growth above 3% was a lie. In addition, the budget deficit will continue to grow to unprecedented levels when outside of a recession (and indeed, the deficit for the first four months of FY 2019 is already 77% larger than the first four months of FY 2018). Trump's promise that his tax cut would pay for itself and that he'd balance the budget within his first term in office? Another lie. So far in Trump's presidency, growth has been strong because of a large fiscal stimulus that, while having little effect on long term growth and blowing up the deficit, increased short term growth. Now that the stimulus is wearing off, however, the reality of Trump's poor economic policies is becoming clear, something that could be politically disastrous for him in 2020. 

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump's Trade Deal W/China Looks Toothless, 2019 Growth Stagnates

In pursuing his trade war with China, Trump promised American workers and farmers that the tens of billions of dollars lost from reduced export access and higher costs would be made up by a comprehensive deal that dealt with the structural advantages China gave to its own industry. In recent weeks, however, it has become increasingly likely that a potential trade deal with China will not do that, and instead will only involve some increased purchases by the Chinese government. The New York TimesWall Street Journal, and CNBC all report that any language in the deal requiring changes to China's intellectual property or industrial subsidies will likely be too vague to have any real effect, and will have few mechanisms for enforcement. This represents a startling defeat for the President. If Trump only wanted an increase in US exports, he could have simply signed the TPP trade deal on his first day in office, which was projected to increase US exports by over $350 billion annually by 2030 (compared to at most an additional $200 billion in annual exports to China under this deal, although even that would be offset by fewer exports elsewhere due to the resulting appreciation of the US dollar). Instead, he has significantly weakened both the US and global economies for gains that could have been accomplished two years ago. 

Furthermore, while fourth quarter GDP came in above expectations at 2.6% (but still below the White House's "long term projection" of 3%, less than a year after the tax cut), early projections for 2019 growth show a significant reduction in growth. The Atlanta Fed sees only 0.5% growth in the first quarter of 2019, while the New York Fed and Goldman Sachs both project 0.9% growth. These growth downgrades come on the back of new data showing that in February manufacturing activity fell to its lowest level since November 2016. Trump's economic policies are largely responsible for this economic slowdown. His trade policies have led to a significant deceleration of global growth as well as a loss of key demand markets for US manufacturers and farmers, both of which have reduced US exports and production. In addition, his tax cut has now clearly failed to lift business investment as was promised by the administration. Non-defense capital spending today is at a lower level than it was in May 2018, and business investment has grown at an annualized average of 4.4% over the past two quarters, compared to a quarterly annualized average of 6.3% in 2017 before the tax cut was enacted. NDN has written a series challenging Trump's reckless trade policy for its harmful effects on the US and global economies, which you can find here. As well, you can read NDN's work detailing how the overall Trump economy has underperformed the strong Obama economy of 2015-16 here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

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