The economic policy of the first Trump administration was characterized by the individual and corporate tax cuts, attempts to repeal the Affordable Care Act ("Obamacare"), trade protectionism, deregulation focused on the energy and financial sectors, and responses to the COVID-19 pandemic.
Over his first term, Trump reduced federal taxes and increased federal spending, both of which significantly increased federal budget deficits and the national debt. The positive economic situation he inherited from the Obama administration continued, with a labor market approaching full employment and measures of household income and wealth continuing to improve further into record territory. Trump also implemented trade protectionism via tariffs, primarily on imports from China. During Trump's first three years in office, the number of Americans without health insurance increased by 4.6 million (16%), while his tax cuts favored the top earners, and failed to deliver on its promises, worsened income inequality, and eroded the country’s revenue needed to continue investment to critical programs like social security and medicine.
Trump took office for the first time at the height of the longest economic expansion in American history. The 128-month (10.7-year) economic expansion that began in June 2009 abruptly ended at a peak in February 2020, with the U.S. entering a recession due to the COVID-19 pandemic. The U.S. unemployment rate, which had hit a 50-year low (3.5%) in February 2020, hit a 90-year high (14.7%) just two months later, matching Great Depression levels. In response, Trump signed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES) on March 27, 2020 which helped maintain family incomes and savings during the crisis, but contributed to a $3.1 trillion budget deficit (14.9% GDP) for fiscal year 2020, the largest since 1945 relative to the size of the economy. Trump left office with 3 million fewer jobs in the U.S. than when he took office, making Trump the only modern U.S. president to leave office with a smaller workforce though this was, in part, due to the COVID-19 pandemic. Throughout his presidency, Trump mischaracterized the economy as the best in American history.
Despite saying during the 2016 campaign he would eliminate the national debt in eight years, Trump as president approved large increases in government spending, as well as the 2017 tax cut. As a result, the federal budget deficit increased by almost 50%, to nearly $1trillion (~$ in ) in 2019. Under Trump, the U.S. national debt increased by 39%, reaching $27.75trillion by the end of his term; the U.S. debt-to-GDP ratio also hit a post-World War II high.
Analysts argued that there is little evidence that either the economy or employment was impacted in the first 2.5 years of his term despite the Tax Cuts and Jobs Act (TCJA) and other policies. Additionally, a review by the Tax Policy Center indicated that the TCJA had little impact on business investment.
Personnel
In November 2016, as president-elect, Trump nominated several officials to serve in his cabinet during his first presidency. He nominated Wilbur Ross as the United States Secretary of Commerce, Steve Mnuchin as the United States Secretary of the Treasury, and Mick Mulvaney as the director of the Office of Management and Budget (OMB).
Economic strategy The economic policy positions of United States President Donald Trump prior to his election had elements from across the political spectrum. However, once in office his actions indicated a politically rightward shift towards more conservative economic policies. Trump's economic and trade policy has been described as neomercantilist.
Prior to election, then-candidate Trump proposed sizable income tax cuts and deregulation consistent with conservative (Republican Party) policies, along with significant infrastructure investment and status-quo protection for entitlements for the elderly, typically considered liberal (Democratic Party) policies. His anti-globalization policies of trade protectionism and immigration reduction cross party lines. This combination of policy positions from both parties could be considered "populist" and likely succeeded in converting some of the 2012 Obama voters who became Trump voters in 2016.
Trump's federal budget proposal for the 2018 fiscal year (submitted to Congress in January 2017) proposed a $1.9 trillion reduction in healthcare spending for health care, primarily in cuts to Medicaid; a $1.9 trillion decrease in nondefense discretionary spending and "overseas contingency operations" defense spending (Afghanistan and other items), various tax-cut proposals that would reduce revenues by $894 billion (or 2%) from 2018 to 2027 period; a decrease in outlays for income security programs by $238 billion over the next ten years; and spending $200 billion over the next ten years for unspecified infrastructure programs.
Journalist Matthew Yglesias wrote in December 2017 that while Trump campaigned as a populist, much of his post-election economic agenda has been consistent with far-right economic policy: "His decision to refashion himself in office as a down-the-line exponent of hard-right policies has been the key strategic decision of the Trump presidency." Yglesias hypothesized this was a bargain to reduce Congressional oversight of the executive branch. Economist Paul Krugman expressed a similar view in February 2020, writing that Trump's initial promises of a more bi-partisan agenda (e.g., raising taxes on the rich, infrastructure investment and preserving safety net programs) ultimately gave way to pursuing more typical Republican policy priorities of tax cuts and reduced safety net spending, although without the previous concerns about the budget deficit that Republicans expressed during the Obama Administration.
Trump also sought to enlist the aid of the U.S. Federal Reserve in supporting his attempts to stimulate the economy. Initially, Fed officials hinted in December 2016 that fiscal policy stimulus (i.e., tax cuts and increased government spending) in an economy already near full employment and growing near its maximum sustainable pace of around 2%, might be counteracted by tightening monetary policy (e.g., raising interest rates) to offset the risk of inflation. To paraphrase a former Fed chairman, "The Fed's job is to take away the punch bowl just when the party gets going." However, after raising rates through 2018, in 2019 the Fed reduced interest rates several times, citing the related issues of a global economic slowdown and Trump's trade policies. President Trump often criticized the Fed for raising interest rates during his tenure, although he also criticized the Fed for keeping rates low during President Obama's administration.
Overall evaluations
Economist Justin Wolfers wrote in February 2019: "I've reviewed surveys of about 50 leading economistsliberals and conservativesrun by the University of Chicago. What is startling is that the economists are nearly unanimous in concluding that Mr. Trump's policies are destructive." He assigned a letter grade of A− to the economy's performance overall, despite "failing grades" for Trump's policies, including an "F" grade for trade policy, "D−" for fiscal policy, and a "C" for monetary policy. One July 2018 study indicated Trump's policies have had little impact on the U.S. economy in terms of GDP or employment.
Writing in The New York Times, Steven Rattner explained in August 2018: Yes, the economy is continuing to expand nicely, which all Americans should celebrate. But no, there's nothing remarkable in the overall results since Mr. Trump took office. Most importantly, there is little evidence that the president's policies have meaningfully improved the fortunes of those 'forgotten' Americans who elected him. Rattner explained that job creation and real wage growth had slowed comparing the end of the Obama administration with an equal period elapsed during the Trump administration; that the 4.1% real GDP growth in Q2 2018 was increased by non-recurring trade contributions and was exceeded during four quarters of the Obama Administration; that 84% of the benefits of the Trump tax cuts would go to businesses and individuals with incomes greater than $75,000 (thus increasing inequality); that the tax cuts and spending increases were forecast to increase the budget deficit in 2019 to nearly $1 trillion, double the previous forecast; and that half the benefit of the tax cuts for the typical middle-class worker in 2018 would be offset by higher gas prices. Rattner expanded his analysis in December 2018, explaining further that the debt to GDP ratio was on a much higher trajectory compared to the forecast when Trump took office, with as much as $16 trillion more federal debt added over a decade.
Writing in The Washington Post, Heather Long explained in August 2019 that: "[A] closer look at the data shows a mixed picture in terms of whether the economy is any better than it was in Obama's final years. The economy is growing at about the same pace as it did in Obama's last years, and unemployment, while lower under Trump, has continued a trend that began in 2011." Nominal wages, consumer and business confidence, and manufacturing job creation (initially) compared favorably, while government debt, trade deficits, and persons without health insurance did not.
Writing in The Washington Post, Phillip Bump explained that for Trump's first term as of September 2019, performance on several key variables was comparable or below Obama's second term (January 2013 – September 2016), as follows: 1) Real GDP was up 7.5% cumulatively under Obama, versus 7.2% under Trump; 2) The total number of jobs was up 5.3% for Obama, versus 4.3% under Trump; 3) The S&P 500 was up moderately more under Obama at +39.9% versus Trump at +34.2%; 4) The unemployment rate fell 2.9 percentage points under Obama versus 1.2 points under Trump; and 5) the national debt was up 10.5% under Obama, versus 15.1% under Trump.
Factcheck.org reported in November 2019 that: "There's no question the economy has been strong since Trump took office, but it was also strong before he took office, a fact he continues to distort as he falsely puffs up his own record." For example, Trump promised real GDP growth of 4–6% per year, but only achieved 2.9% growth in 2018, the same rate as 2015. Further, job creation was slower under President Trump than comparable periods at the end of the Obama Administration. Many of Trump's claims about unemployment, labor force participation, and median household income were also false or exaggerated.
Writing in The New Yorker, John Cassidy described the opportunity costs of Trump's tax cuts: Some of the debt that is being issued to pay for the tax cut could have been used to finance investments in infrastructure, renewable energy sources, universal day care, adult retraining, reducing the cost of higher education, or any other number of programs that yield long-term benefits to ordinary Americans. Instead, the biggest handouts went to corporations, who saw their tax rate [statutory] reduced from 35% to 21%.
President Trump claimed in his third State of the Union Address in February 2020 that: "If we hadn't reversed the failed economic policies of the previous administration, the world would not now be witnessing this great economic success." The Trump administration provided statistics in support of this claim. However, Politifact rated this claim false, explaining: "The bottom line: For virtually each of these measurements, we found that the trend lines continued almost seamlessly from the second half of Obama's presidency into the first three years of Trump's tenure. Trump's claim that he turned around a failing economy is wrong."