The Corner

Economy & Business

Trump’s Two Economies

Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, greeted today’s jobs report (196,000 new jobs in March) by calling Donald Trump “a President who has turned this economy around after years of stagnation.” It’s a view that is quite common among Republicans. I don’t think the jobs numbers, or any of the other economic numbers, really fits with that characterization: What we’ve mostly had is the continuation of trends, quite as though the economy does not depend on who is in the White House.

That characterization is also a poor fit with something else we have been increasingly hearing from Republicans over the last few months: calls for lower interest rates and quantitative easing. President Trump has come out in favor of both.

If we have a strong economy thanks to Trump’s policies, we shouldn’t need to have lower interest rates and quantitative easing to keep it going. If Trump’s policies have led to an increase in the economy’s potential growth rate, an increase that has already been showing up, then interest rates should go up and not down. (Higher expectations of economic growth should cause the neutral interest rate—the rate at which inflation stays on target—to rise.)

At many points in time, an economy will yield statistics that tell conflicting stories about its trajectory. The yield curve right now strikes many observers as a sign of impending recession. Job growth, on the other hand, is still strong. But wait! Job growth is slowing. Does that mean the economy is about to flatline, or is it a natural consequence of having reached a high level of employment? There is plenty of room to interpret the data in different ways, or to confess that the picture is unclear.

But some sets of arguments about the economy can’t simultaneously be true. What Republicans are saying, that Trump has given us an economy that’s stronger than ever but can’t thrive under the burden of a 2.5 percent interest rate, falls into that category.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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