The Big Economic Shift: President Trump
Donald Trump is the President of the United States and will be running for re-election in 2020. The following is a summary of economic legislation that he has supported and passed, as well as further information about his proposed policies for the future.
Many of President Trump’s economic policies have been enacted through executive action. If a Democratic president were to be elected in 2020, many of these policy changes could be easily reversed with new executive orders. The policies passed by legislation, like the TCJA (Tax Cut and Jobs Act) are the policies most likely to stay in place, but many tax policies sunset in 2027. This review is not meant to be exhaustive, but to focus on major policy initiatives and changes that have occurred during the Trump Administration.
President Trump has been one of the most controversial presidents in our lifetimes. However, similar to our other research on the Democratic 2020 candidates, the purpose of this report is to objectively review his policies towards key sectors of the US economy. Unlike the Democrats, the Trump/Pence 2020 Campaign website states no future policy proposals at this time. Therefore, the bulk of this research reviews the Trump administration’s previous actions. Readers can expect that the policies put in place already, will likely remain in place if President Trump is re-elected.
On the Whitehouse website there are five main categories:
President Trump’s relevant Executive Orders from 2017-2019 are as follows:
- Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal
- Expediting Environmental Reviews and Approvals for High Priority Infrastructure Projects
- Reducing Regulation and Controlling Regulatory Costs
- Core Principles for Regulating the United States Financial System
- Enforcing the Regulatory Reform Agenda
- Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the “Waters of the United States” Rule
- White House Initiative To Promote Excellence and Innovation at Historically Black Colleges and Universities
- Promoting Energy Independence and Economic Growth
- Establishing the President’s Commission on Combating Drug Addiction and the Opioid Crisis
- Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws
- Omnibus Report on Significant Trade Deficits
- Buy American and Hire American
- Identifying and Reducing Tax Regulatory Burdens
- Promoting Agriculture and Rural Prosperity in America
- Implementing an America-First Offshore Energy Strategy
- Addressing Trade Agreement Violations and Abuses
- Establishment of Office of Trade and Manufacturing Policy
- Expanding Apprenticeships in America
- Establishing a Presidential Advisory Council on Infrastructure
- Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects
- Promoting Healthcare Choice and Competition Across the United States
- Streamlining and Expediting Requests To Locate Broadband Facilities in Rural America
- Reducing Poverty in America by Promoting Opportunity and Economic Mobility
- Developing Efficient, Effective, and Cost-Reducing Approaches To Federal Sector Collective Bargaining
- Ocean Policy To Advance the Economic, Security, and Environmental Interests of the United States
- Establishment of the Task Force on Market Integrity and Consumer Fraud
- Strengthening Retirement Security in America
- Strengthening Buy-American Preferences for Infrastructure Projects
- Promoting Energy Infrastructure and Economic Growth
- Improving Price and Quality Transparency in American Healthcare To Put Patients First
- Establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing
- Advancing American Kidney Health
- Maximizing Use of American-Made Goods, Products, and Materials
- Modernizing Influenza Vaccines in the United States to Promote National Security and Public Health
Economy and Job Creation
Under the “Economy & Jobs” section on the Whitehouse website, President Trump notes that “through needed tax cuts and reform, the Administration will bring jobs back to our country.” In addition, US workers will be supported and helped by “expanding apprenticeship programs, reforming job training programs, and bringing businesses and educators together to ensure high-quality classroom instruction and on-the-job training.” Early in his presidency he put forward an apprenticeship-expanding executive order, with the aim of supporting Americans to get higher-paid jobs and obtain relevant skills.
One of his biggest financial policies was the Tax Cuts and Jobs Act 2017 (TCJA). The effect of the TCJA was to make substantial changes to individual and corporate base income tax rates, to allow deductions for pass-through income, and to cut the maximum corporate tax rate to 21%. As well, TCJA changed depreciation schedules to allow faster schedules and to incentivize business to increase capital expenditures. Lastly, the TCJA made major changes to how US multinational corporations accounted for earnings overseas, required these earnings to be brought back to the United States and taxed.
In early 2017, he also issued an executive order that sets out a number of “Core Principles”, intended to regulate the US financial system. These core principles included encouraging consumer choice, avoiding taxpayer-funded bailouts, increasing competition, and making regulations more efficient. A full listing of the Trump Administration’s regulatory recommendations can be found on the US Treasury’s website under Policy Issues and then Regulatory Reform.
In 2018 Trump also signed into law a bill that created the biggest reform of bank regulations since 2008, the Economic Growth, Regulatory Relief, and Consumer Protection Act. It was passed with bipartisan support, including 33 House Democrats, and the purpose was to raise the “too big to fail” regulatory standards upon banks, from a threshold of $50 million to $250 million. This eased regulations on all but the biggest banks.
The Trump administration released its 2020 budget on March 11, 2019. The budget asked for $1.426 trillion in discretionary spending. A significant portion of this spending is for the Department of Defense ($750 billion).
Under President Trump, the unemployment rate has significantly fallen, to the lowest rate in nearly 50 years. Overall, approximately 5.8 million jobs have been added to the economy since President Trump took office. As well, the jobless rate for Hispanics hit a record low in September of 3.9% and the African American rate stayed steady at 5.5%, which was also a record low.
President Trump’s “Buy American and Hire American” executive order intended to “maximize … the use of goods, products, and materials produced in the United States”. It also intended to “create higher wages and employment rates for workers in the United States” by restricting entry into the United States for foreign workers. Later, on the same issue, he put out another executive order to “maximize, consistent with law, the use of goods, products, and materials produced in the United States, in Federal procurements.”
In April 2017 he released an executive order intending to reduce the burden of tax regulations. He has also stated that he will promote more tax cuts in 2020, but without any clear details on for whom, and to what extent.
With respect to housing, Trump aimed “to work with Federal, State, local, tribal, and private sector leaders to address, reduce, and remove a multitude of overly burdensome regulatory barriers that artificially raise the cost of housing development and help to cause the lack of housing supply.” The aim was to create more affordable housing, and to “reduce housing costs, boost economic growth, and provide more Americans with opportunities for economic mobility.”
He also established an Interagency Task Force on Agriculture and Rural Prosperity, intended to “promote American agriculture and protect the rural communities where food, fiber, forestry, and many of our renewable fuels are cultivated.” He also established the Office of Trade and Manufacturing Policy to “serve American workers and domestic manufacturers while advising the President on policies to increase economic growth, decrease the trade deficit, and strengthen the United States manufacturing and defense industrial bases.”
He released an executive order on HCBUs, intended to “advance America’s full human potential; foster more and better opportunities in higher education; strengthen the capacity of HBCUs to provide the highest-quality education; provide equitable opportunities for HBCUs to participate in Federal programs; and increase the number of college-educated Americans.”
In addition, he made an order expanding access to multiple-employer retirement plans, reducing the number and complexity of employee benefit plan notices and disclosures, and altering the minimum distribution amounts.
The welfare system was also to be reformed, with the Trump administration aiming to remove duplicate programs, focus on welfare being available to people “truly in need”, and establishing a set of Principles of Economic Mobility to move people from the welfare system into employment.
President Trump also withdrew from the Trans-Pacific Partnership, over concerns that China would later enter the agreement through a “back door” among others. President Trump also noted with regard to the TPP, the US withdrew, “to create fair and economically beneficial trade deals … it is the intention of my Administration to deal directly with individual countries on a one-on-one (or bilateral) basis in negotiating future trade deals.”
Trump proposed a new US-Mexico-Canada agreement, the USMCA, to replace the North American Free Trade Agreement or NAFTA. This has (as of October 2019) been signed but not ratified.
In many ways the USMCA is very similar to NAFTA. Steel and aluminum tariffs remain in place. Under NAFTA, automobiles were required to be 62.5% comprised of US, Mexican, or Canadian parts to qualify for zero tariffs. Under USMCA this will be raised to 75%. It also includes an increase in the percentage of the Canadian dairy market that can be imported from the US, a raise to 3.6% from the previous 1%. It also includes a provision that extends copyright from 50 to 70 years and extends the period that pharmaceutical drugs are protected before they are open to generic competition.
Finally, it also includes a “sunset clause” that will require the agreement to be renegotiated in 16 years. NAFTA did not include this kind of provision.
One of President Trump’s major trade issues has been trading relationships with China. In March 2018, President Trump announced that three separate actions would be taken towards China with regard to trade. These included:
- Tariffs on approximately $50 billion of Chinese imports.
- Pursuing dispute settlement in the World Trade Organization (WTO) to address China’s discriminatory technology licensing practices.
- Addressing concerns about Investment restrictions in industries or technologies deemed important to the United States.
The report prompted China to respond with tariffs in kind, and the stock market plunged due to fears of a trade war. In addition, over the course of 2019, the US administration targeted a number of Chinese companies: the Chinese technology giant, Huawei, in particular. The US Justice Department unsealed judgments against Huawei for “theft of intellectual property, obstruction of justice and fraud”, which Huawei denied. The disagreement goes back as far as 2012, when the US banned US companies from using Huawei equipment, over fears that it could be used by the Chinese government to spy on other countries. President Trump has described Huawei as a “national security threat”. The blacklisting of Huawei was more-recently followed by the blacklisting of 28 Chinese government entities and artificial intelligence tech companies. These entities have been placed on the “so-called entity list”, which means that US businesses need a special license to do business with them. These actions have further escalated tensions in the US-China trade war.
During 2018, the EU was also affected by tariffs applied to steel and aluminum, which the EU then responded to on 22 June, affecting 2.8 billion euro of US products. The WTO’s recent ruling over the Airbus dispute also contributed to this battle, with the WTO deciding that the US is permitted to impose up to $7.5 billion in tariffs on EU goods annually. These disputes widen and continue the trade war.
President Trump also proposed to conduct “performance reviews” of all trade agreements, to ensure that trade relations “benefit American workers and domestic manufacturers, farmers, and ranchers; protect our intellectual property; and encourage domestic research and development.”
Energy and the Environment
In January 2017, Trump made an executive order to “streamline and expedite, in a manner consistent with law, environmental reviews and approvals for all infrastructure projects” with the aim of making “high priority” infrastructure projects more efficient. He also released another executive order with the aim of removing regulatory burdens from domestic energy production, including a review of the Clean Power Plan. In October 2017 Trump also announced that he would withdraw from the Clean Power Plan. This was intended to remove Obama-era limits on carbon emissions from US power plants.
Trump’s energy plan is called the “America First” energy plan. This included the withdrawal from the Paris Climate Agreement, which is an agreement intended to cut greenhouse gas emissions by 26-28% below 2005 levels by 2025, and to zero emissions by 2100. The reason behind Trump’s withdrawal was that he wanted to negotiate a better deal. To this date, no deal was reached, and as the agreement will take 4 years to withdraw from, it is now also an election issue. House Democrats in 2019 drafted a bill intended to require the US to honor its commitments to the Paris Climate Agreement.
As part of this American First plan, he made an executive order to promote offshore drilling and to “encourage energy exploration and production, including on the Outer Continental Shelf, in order to maintain the Nation’s position as a global energy leader and foster energy security and resilience.” In addition, he promoted the increased mining and drilling of coal, oil, and natural gas, and in the same order reduced Clean Water Act restrictions and safety regulations for natural gas transportation.
Donald Trump intended to, and attempted to repeal and replace the Affordable Care Act (“Obamacare”) in 2017, with his proposed measures not passing Congress after former Sen. John McCain voted no to the legislation. However, one element of the Obamacare reform did pass, the repeal of the individual mandate. His first executive order was to attempt to minimize the economic burdens of the ACA, pending its repeal. He also expanded several aspects of the ACA, including promoting association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements (HRAs). This was with the aim of increasing choice in the health insurance market.
In 2017, President Trump declared the opioid crisis as a public health emergency. This was followed in 2018 by the release of the Initiative to Stop Opioid Abuse. This included three parts:
- Reducing demand and over-prescription by educating Americans about the dangers of opioid misuse;
- Cutting down on the supply of illicit drugs by cracking down on international and domestic drug supply chains;
- Helping those struggling with addiction with evidence-based treatment and recovery support services.
In addition, the Trump administration secured $6 billion in new funding as of October 2018, to fight opioid abuse. A Safer Prescription Plan was implemented that aims to cut opioid prescription fills by one third within 3 years. He also plans to keep dangerous drugs out of the United States by securing borders. In addition, in 2018 he passed the SUPPORT Act with bipartisan support.
In addition, he promoted safer and more-efficient influenza vaccines, and increased funding for kidney-health issues, treatment, and prevention.
One of the few policies that he has stated for 2020 is to completely repeal the ACA, but this has very little Republican support.
He also recently signed a new executive order to improve private Medicare plans for seniors. He notes that this will be done by, “enhancing its fiscal sustainability through alternative payment methodologies that link payment to value, increase choice, and lower regulatory burdens.”
With regard to the economy, many of Trump’s policies have had a significant positive short-term impact, but potentially negative long-term impact to debt. A report from the Tax Policy Center at the Urban Institute and Brookings Institution found that the short-term effects of the Tax Cuts and Jobs Act would be to stimulate the economy, but that the long-term effects would be negligible. A 2018 Tax Foundation report found that the impact would be an increase in long-run GDP of 1.7%, the creation of 339,000 jobs, and an increase in wages by 1.5 percent. These positive changes can have major effects on the economy and contributed to strong GDP growth in 2018.
Strong job growth under President Trump is a major positive, but it is unclear as to whether this trend will continue if current fiscal spending levels aren’t maintained. As well, the cut in the corporate tax rate has assisted the US equity markets to rally to all-time highs in September. This has added to the wealth of voters who own stocks, mutual funds and ETFs via their 401ks, IRAs or personal investment accounts.
There is debate as to whether the short-term policies that have positively affected the economy are at the cost of long-term economic damage in the form of large budget deficits, the trade war, and the withdrawal from climate change agreements. These long-term problems are particularly difficult to solve as the impact is sometimes felt slowly, in ways which don’t appear to need a solution until they reach a crisis point.
On the negative side, Trump’s trade policies have negatively impacted consumer confidence, created a potential global recession in manufacturing and increased volatility in the financial markets. As well, global supply chains have been disrupted, capital expenditures have stalled, and uncertainty has risen over the extension of the current economic recovery. The continuing imposition of tariffs has caused the US-China and US-EU relationships to become increasingly strained.
With regard to the USMCA, it is not clear that the USMCA is a major upgrade from NAFTA, and it may have had the effect of weakening trade relations between the US, Canada, and Mexico. If not passed by Congress soon, it will add to the growing uncertainty for American business.
In general, the impact of switching from NAFTA to the USMCA will primarily affect these three industries (auto, pharmaceutical, and dairy farming) and will not necessarily have a large impact outside of this. It’s possible that the provisions of the USMCA will increase costs for North American automakers, which could then be pushed on to consumers and may reduce demand.
One of the major issues may be the increase in the protection period for pharmaceutical drugs (delayed generics). This has the potential to raise the costs of medicines and medical care, which are already extremely high. On the flipside, reducing the period in which pharmaceutical drugs are protected from competition can reduce the drive to innovate and develop new medicines.
President Trump’s policies have an unclear short-term impact with regard to the environment, as the picture of carbon emissions from the US in the past several years has been variable. In 2018 the US saw a 2.7% rise in carbon emissions, but the US Energy Information Agency also predicted a 2.2% decline in carbon emissions for 2019. The short-term impacts from President Trump’s environmental policies have not been acutely negative, but the long-term impacts could potentially reverse some of the largely declining trends in carbon emissions (down 11.5% between 2005 and 2015). A large part of this decline was due to a shift away from coal and towards natural gas and renewables. While natural gas emits far less carbon dioxide than coal, it still has a high emissions cost (methane) when compared to renewables. In saying that, a large part of the increased emissions in 2018 was also due to the growth of the entire US economy. Due to President Trump’s increased focus on coal and natural gas, rather than renewables, an accompanying increase in carbon emissions long-term could contribute negatively to climate change, though both China and India are currently substantially bigger carbon emitters. The picture is clearly complex.
On the positive side, Trump’s approach to dealing with the opioid crisis has had a number of positive effects. For example, the number of first-time heroin users ages 12 and older fell by more than 50% by July 2017, and by October 2018 high-dose opioid prescriptions fell by 16%. There has also been a 20% increase in young adults receiving outpatient treatment. Deaths from prescription drugs and heroin are slowing, and the Trump administration’s efforts have had a major impact.
The passing of bipartisan legislation also indicates the positive outcome of the administration’s focus on this issue. The only downside is that the narrow focus on opioids can miss out on some other drug-related issues, and the number of deaths from fentanyl, meth, and cocaine are on the rise. In saying that, the rise in deaths from meth began in 2010, and spiked in 2017; this is not a new issue, but a latent one that will also need attention in the near future.
Lastly in December of 2018, President Trump signed the First Step Act into law. This was a bipartisan bill aimed at reducing recidivism, refined sentencing laws and reduced harsh penalties. According to Jurist, “The bill expands in-prison and post-release employment programming, includes components related to alternatives to prison for low-risk prisoners such as home confinement, prohibits restraints on pregnant prisoners, and mandates evidence-based treatment for opioid and heroin abuse, among others. The bill revises the Controlled Substances Act’s harsh drug penalties, including a lowering of the “three strikes” rule for drug felons that had sent them to life in prison, now down to 25 years, and it changes the two or more felonies within the rule from any “felony drug offense” to “a serious drug felony or serious violent felony,” defined in the text of the bill.” The law has been hailed as the most significant criminal justice reform legislation in years.
In general, President Trump’s economic policies have had a primarily positive impact, and he has also made great strides with respect to addressing particular health and sentencing issues. The problem is that some of the Trump administration’s other policies have had significant negative effects, particularly with regard to trade. His environmental policies may also have negligible effects immediately but could contribute long-term to climate change and environmental problems. Much like the Democratic 2020 candidates, there is a question of trade-offs with each of his policies, and while some of his policies have paid off in positive ways, others have been at the cost of long-term domestic and international economic and environmental stability.