Before Donald Trump was elected president, there was a lot of negative media coverage with a lot of pundits predicting that he would wreck our economy. About a year and a half into his presidency, it appears to have been the exact opposite. But why? Does it really make sense for the economy to have been doing so well with these crazy policies, insane tweets, and political rollercoasters of emotion? The short answer is yes.
While I may have studied economics, I cannot say for sure what the reasons are for this economic boom under Trump, which has been beyond piggybacking off of Obama’s economy for some time. I will try to explain what’s going on as I understand it.
Obama and the 2016 Election
During the 2016 Presidential Election, we saw three feasible candidates to win the presidency: Hillary Clinton, Bernie Sanders, and Donald Trump. It came down to Clinton and Trump, which made it a no-brainer for employers. Under President Obama, businesses were slapped with taxes after the Bush tax cuts were extended for a short period. This, paired with the 2008 financial crisis, made businesses want to keep their money hoarded for a rainy day. In 2012, many businesses and those worried about Obamacare were hellbent on keeping President Obama a one-term president. After Mitt Romney screwed himself out of the election, the country was susceptible to the aforementioned tax hikes.
Fast forward to 2016 and you’ve got yourself two stable, economically predictable candidates and one candidate who was economically unpredictable. Out of the three feasible candidates, Donald Trump and Bernie Sanders were the most economically stable and predictable; we knew that one wanted to dramatically cut taxes while the other wanted to dramatically raise them. Hillary Clinton, however, was far more unpredictable. No matter what she said, employers didn’t believe her, especially after she said we would get another four years of Obama if she won.
Employers Like Consistency
So what’s this “consistency?” Employers seemed to be more relaxed after President Trump’s election. Finally, they could breathe again with the peace of mind of tax cuts. Bonuses were handed out at several companies, both big and small. Even the tech industry is pouncing on the opportunity to bring home its nearly $400 billion held overseas. Apple alone is bringing home $250 billion, with an expected tax bill of $38 billion. While this is a strong signal that something is being done right, we need to remember that the 2018 Midterm Elections are going to be far more telling about which direction the economy will take.
If anything, employers should want to keep Trump and the Republicans in office, if not increase the number of Republican held seats in Congress. While the underemployment rate could be lower, the official unemployment rate is at a historic low. Black unemployment is also at a historic low. Jobs reports are outperforming our forecasts. This is the result of one of two things: 1. Trump is doing everything perfectly. 2. Businesses like Trump’s domestic economic policy. My money’s on the latter. Even under President Obama’s economic upturn, we hadn’t seen businesses this comfortable in nearly a decade. That’s a big deal.
Assuming that the American public is happy with the economic outcomes, we’re likely going to see the Republicans gain more seats in Congress. While this seems a little crazy, it’s not too farfetched to believe that it’s likely going to happen. Moderates that don’t care about party loyalty will likely try to make an independent decision based on what they’ve seen. If this happens and the GOP gains more seats, we’re likely going to see a lot of things get done in the next two years. So far, things are looking pretty good in this respect. If things keep up and the 2018 Midterms favor the GOP, it will be a strong signal that 2020 will be similar if this momentum can keep going until then.