How many times have you heard someone say, “I don’t agree with Donald Trump’s style and tone, but his policies are getting the job done. After all, look at how well the economy is doing.” They go on to elaborate on the U.S. economy’s impressive performance as proof positive that it’s OK to turn a blind eye to the problems with the current administration, such as the fanning of trade wars, reckless diplomacy with Russia and North Korea and the divisiveness of each new presidential tweet.
There’s a term for this in politics. It’s called “political expediency.” It means making a political choice based on short-term benefits, even if long-term outcomes may be at risk. Purveyors of political expedience take the gamble.
I see a big problem with this line of reasoning. I don’t think the U.S. economy is doing as well as many people think. A reasonable case can be made that we are experiencing a sugar high, fueled by deficit-financed tax cuts and unbridled government spending. Our short-term enthusiasm for the U.S. economy may give way to a longer-term reality that the sugar high wasn’t worth the fun or political expedience.
The undercurrent to this line of reasoning is debt. Analysts estimate the federal budget deficit will increase from $666 billion in fiscal year 2017 to $800 billion in the current fiscal year, and to nearly a trillion dollars by 2019. An even more important metric is the debt-to-GDP ratio. Total U.S. public debt as a percent of gross domestic product has risen from 64 percent in the first quarter of 2008 to 105 percent in the first quarter of 2018. This level of debt creates a double whammy for the future economy. It crowds out private investment that would increase productivity, and it requires large interest payments that supplant investment on other important national needs.
I once heard Michael Lewis, author of "Moneyball" and "The Big Short," among other best-selling books, say we are afflicted with “present bias.” He says we systematically undervalue the future. In doing so, we take actions that benefit us today but hurt us tomorrow. I fear the United States is doing that right now.
I think we should replace our present bias with a future bias. The future bias should include several policy steps:
- Invest more in transportation and information technology infrastructure. Infrastructure investment is seed corn for future economic success.
- Invest more in human capital, including research and development. Like past U.S. investment in the internet and GPS, we need to be at the forefront of the next revolution in human achievement.
- Reinvent the social welfare system to properly place incentives and limit government. The new economy requires a rethought and smarter social safety net.
- Fix our broken immigration system to reward hardworking and talented people who want to contribute in this country.
- Embrace free and open markets to increase choice and competition. Trade wars are decidedly short term in focus.
I’m certain there are other worthy policy innovations to consider. I’m also sure that deficit-financed tax cuts, without adjustments to spending, are a recipe for future stagnation. Anyone who has observed a child with a sugar high knows that it is fleeting. The increased glucose in the bloodstream produces a lot of energy at first, only to be replaced with a worn-out and tired child who needs a nap. I don’t want the U.S. economy to take a nap.50 comments on this story
Next time you hear someone compliment this president for his economic record, take time to think about the economic fundamentals. We borrowed money to reduce taxes and stimulate an economy already at full employment. We did nothing to fix our spending problem. We continue to accumulate greater and greater debt that will be the responsibility of our children and grandchildren.
Economies thrive based on the decisions we make. I worry we are making short-sighted decisions based on misplaced political expediency. It’s time for people who understand the issue to speak up.