Analysis: Trump Makes a Point About the Unfair Economy
Washington — You shall not crucify Donald Trump upon a cross of economic coherence.
The nation’s premier real estate mogul-turned-reality TV star, utterer of the phrase “You’re fired” and, for the moment, Republican presidential front-runner, has risen to the top of polls by flinging himself on the real third rail of our politics: economic nationalism.
Trump is anti-trade, anti-immigration, pro-manufacturing and the darling of working-class whites who haven’t heard this kind of message since the last time a billionaire elbowed his way in to a Bush-Clinton contest. The problem, though, with this kind of populism is that it requires an unhealthy dose of cognitive dissonance.
Specifically, Trump wants a weaker dollar, to make American goods and services cheaper to sell abroad, but he doesn’t want to do anything that would, well, make the dollar weaker. It’s the contradiction at the heart of Trumponomics.
Now, this is an old kind of politics that resurfaces every now and then, even though both parties have given up on it other than as quadrennial Rust Belt rhetoric. It’s the politics of “the war on coal” and “renegotiating NAFTA” and, most of all, “getting tough on China.” Or, as it’s more commonly known, economic populism.
You can trace its lineage from Trump, Ross Perot and William Jennings Bryan all the way back to Andrew Jackson. And this year, it has come up not only in Trump’s candidacy but in that of Sen. Bernie Sanders, I-Vt., and opposition to a major trade deal with the Pacific. At the center are facts that neither Democrats nor Republicans love to acknowledge: that globalization has costs as well as benefits, and that a stronger dollar may not always be in our interest.
That’s something no Treasury secretary from either side of the aisle would say now. That’s because reassuring other nations that the United States won’t try to devalue all the dollars they’ve bought isn’t just de rigueur anymore. It’s all but part of the job description. The result is a bipartisan blind spot the size of Ohio. Sure, free trade creates more winners than losers, but that still leaves a lot of losers — especially when the dollar is too strong. How many, exactly? Well, economists David Autor, David Dorn and Gordon Hanson estimate that trade with China cost the United States almost 1 million manufacturing jobs between 2000 and 2007.
That has left Trump to serve this underserved political market. That is what happens when the establishment doesn’t pay attention to people’s problems. In this case, a billionaire real estate mogul has cast himself as the tribune of blue-collar workers besieged by cheap goods and cheap currencies from abroad. And so Trump has questioned the sanctity of the United States’ strong-dollar policy.
As he tells it, a too-expensive dollar has put our workers at a competitive disadvantage at the same time that it has allowed the wealthy to “buy property all over Europe.” It’s the same anti-elitist script as the ’90s — the 1890s, that is — when farmers agitated for a cheaper dollar that was in their interests but not in Wall Street’s.
And, as surprising as it may be, Trump kind of has a point here. China’s artificially cheap currency really did cost the United States jobs (although not anymore), and the strengthening dollar really may be the biggest threat to the recovery right now. But it’s one that U.S. policymakers either don’t understand or won’t do anything about.
Other nations try to, though. Japan, as economist Paul Krugman noted, wanted China to stop buying its debt — that’s how currency manipulation works — while the United States, on the other hand, tends to worry that China will stop buying its debt.
So it shouldn’t be a surprise, as Bloomberg News’ Joe Weisenthal observed, that Trumponomics looks a lot like Japan’s Abenomics. Both want to jump-start the economy with a weaker currency, infrastructure spending and military buildup, all as an offering to the gods of national greatness who have allegedly forsaken us. At the very least, it’s a much more plausible path to 4 percent growth than anything Jeb Bush, one of Trump’s GOP rivals, has come up with.
The only hitch is that Trump has been against the things that would make Trumponomics work. In 2011, he lambasted the Federal Reserve’s stimulus efforts — basically printing money — as “absolute insanity” that was “killing the dollar.” A year later, he warned that it was only a matter of time before “inflation will start rearing its ugly head.” Now, never mind that these predictions didn’t come true. If you want to devalue the dollar, then you’re going to have to print more of them and promise not to un-print them.
But this says what people don’t want to hear — that there are always trade-offs — and Trump doesn’t want to tell them that.
The reality is that as much as they would love a manufacturing renaissance powered by a weak dollar, they hate inflation even more. It’s a question of fairness, as is everything for them. Working-class whites feel as though Washington has betrayed them with trade deals that take away jobs, immigration that makes jobs pay less and inflation that steals whatever is left.
Trumponomics, then, is just like any other populism. It’s a wish that the world was simple and just some “common sense” away from being better. It’s not so much a left vs. right politics as us vs. them. And that’s why Trump’s ideological flexibility isn’t necessarily a negative for voters who care more about how high their Social Security benefits are than how high the top marginal tax rate is.
You shall not press down upon the brow of Trump this crown of consistency.