Part 1: Summary this reading:

Grading Trumponomics

How to judge President Trump’s economic record
Before the pandemic Trumponomics got one thing right and one thing wrong
PRESIDENT DONALD TRUMP says Americans should re-elect him because of his record on the
economy. Before covid-19, America enjoyed its lowest unemployment rate in 50 years, fast
annual wage growth of almost 5% among the lowest-paid workers and a buoyant stockmarket.
Mr Trump attributes all this to his three-pronged strategy of tax cuts, deregulation and
confrontational trade policy, and says more of the same will revive the economy after the
pandemic. Many voters agree. The economy is one issue where Mr Trump does not face a big
deficit in the polls.
Yet his administration’s economic record from before the pandemic is mixed. It got one thing
right: when Mr Trump took office the economy was still in need of stimulus, which tax cuts and
more spending helped provide. But that success has also helped conceal the damage done by his
protectionism.
Trumponomics has not achieved what its proponents forecast. While campaigning in 2016 Mr
Trump predicted economic growth of 4% or more; in office the target was cut to 3%. Between
the start of 2017 and the end of 2019 America grew by an annual average of 2.5%, barely faster
than the 2.4% growth of the three preceding years. The Trump administration argued that tax
cuts would pay for themselves and that cutting red tape for business would spur investment. In
reality the budget deficit rose from 4.4% to 6.3% of GDP, on the IMF’S measure, and although
deregulation did help boost business confidence there was no sustained jump in investment
growth.
Both regulatory and tax reform have reined in some bad policies, such as tax deductions for
mortgage interest and state and local taxes. But improvements like this are, relative to the size of
the economy, small. In the three years to 2019 the administration says that it eliminated $51bn of
regulatory costs, which is only about 0.2% of one year’s GDP and ignores any public benefits

from regulation. Most estimates suggest the long-term boost to growth from Mr Trump’s tax
reform will be about a tenth of a percentage point per year or less.
What was exceptional about America’s pre-pandemic economy was not, therefore, its supply
side, nor even its jobs boom, which was replicated across the rich world. It was that as global
economic growth slowed sharply in 2018 and 2019, America’s growth fell only relatively gently.
That was because it was temporarily propped up by a bigger budget deficit. Mr Trump can take
some satisfaction from his pump-priming. In 2017 many economists argued that it was a bad
time for stimulus because the economy and the labour market had reached their limits; in 2018
the Federal Reserve, coming to a similar judgment, raised interest rates four times. It turned out
that there was still plenty of slack. As a result the fiscal splurge caused faster growth than seen
elsewhere in the rich world without provoking much inflation. Interest rates came down again,
making public debt more affordable.
The irony is that a crude stimulus to growth might not have been necessary were it not for Mr
Trump’s trade war and tariffs, which hurt confidence and weighed on global growth. Before the
pandemic the IMF estimated that the fight between America and China might wipe nearly 1% off
global output. America offset this drag, rather than escaping it altogether. Recent research
suggests that Mr Trump’s tariffs destroyed more American manufacturing jobs than they created,
by making imported parts more expensive and prompting other countries to retaliate by targeting
American goods. Manufacturing employment barely grew in 2019. At the same time tariffs are
pushing up consumer prices by perhaps 0.5%, enough to reduce average real household income
by nearly $1,300.
Taken together, the various strands of Trumponomics offer three lessons. First, there are big
benefits to running the economy hot and keeping the job market tight, particularly for poor
workers. Policy should be aimed at restoring these conditions as quickly as possible after the
pandemic. If that means running large deficits while interest rates are low, so be it (although
given the parlous state of America’s infrastructure, the money would be better spent on growth-
boosting investments than on regressive tax cuts). Second, in already deregulated economies
supply-side reforms may not always show up much in GDP growth. That does not make them
undesirable—it is good to eliminate tax breaks—but it does mean politicians should not make
wild promises about growth, which is weighed down by immutable forces such as the population
ageing. The third lesson is that tariffs are usually a self-defeating way to promote manufacturing,
and harm growth and consumers.
In 2019 Mr Trump presided over the best labour-market conditions America had seen in several
decades. He deserves some of the credit. Despite that, he is overselling Trumponomics. It was
both a help and a hindrance.

Part 2: Write 2 paragraph about opinion:

According to the graph (Who are the 1%, The Economist, January 21 2012) the 1% richest people in America have received almost 20% of the total income in the last years.

Do you agree that they should pay higher taxes? Or instead, do you think it is wrong to charge them with higher taxes because they’ll create less jobs? Do you think that the college should be free and medicare for all as it is in other countries? Or you are opposed to free public services because the government’s deficit will be too high? Or make people lazy?

For this discussion, tell the class what you wish for our country in ECONOMICS terms (REMIND this is a macroeconomics class). Include in your arguments the most important macroeconomics variables as: government revenues and expenditures, deficit and national debt , inflation, unemployment, among others . This week’s readings are going to help you to build your ideas and opinions.