Are Democrats hexing the Trump boom with bad thoughts?
Almost four decades ago then-candidate George H.W. Bush used the phrase “voodoo economic policy” to describe Ronald Reagan’s claim that cutting taxes for the rich would pay for itself. He was more prescient than he could have imagined.
For voodoo economics isn’t just a doctrine based on magical thinking. It’s the ultimate policy zombie, a belief that seemingly can’t be killed by evidence. It has failed every time its proponents have tried to put it into practice, but it just keeps shambling along. In fact, at this point it has eaten the brains of every significant figure in the Republican Party. Even Susan Collins, the least right-wing G.O.P. senator (although that isn’t saying much), insisted that the 2017 tax cut would actually reduce the deficit.
During the 2016 campaign Donald Trump pretended to be different, claiming that he would actually raise taxes on the rich. Once in office, however, he immediately went full voodoo. In fact, he has taken magical thinking to a new level.
True, whenever tax cuts fail to produce the predicted miracle, their defenders come up with bizarre explanations for their failure.
My favorite until now came from Art Laffer, the original voodoo economist and recent recipient of the Presidential Medal of Freedom. Why did George W. Bush’s tax-cutting presidency end not with a boom, but with the worst economic slump since the Great Depression? According to Laffer, blame rests with Barack Obama, even though the recession began more than a year before Obama took office. You see, according to Laffer, everyone lost confidence upon realizing that Obama might win the 2008 election.
But Trump has gone one better. As it has become increasingly clear that the results of his tax cut were disappointing — recent data revisions have marked down estimates of both G.D.P. and employment growth, to the point where it’s hard to see more than a brief sugar high from $2 trillion in borrowing — Trump has invented ever more creative ways to blame other people. In particular, he’s now claiming that the promised boom hasn’t arrived because his opponents are hexing the economy with bad thoughts: “The Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election.”
Can opposition politicians really cause a recession with negative thinking? This goes beyond voodoo economics; maybe we should call it evil-eye economics.
To be fair, the claim that Democrats are hexing his boom is a secondary theme in Trump’s ranting. Mostly he has been blaming the Federal Reserve for its “crazy” interest rate hikes. And the truth is that last year’s rate increases pretty clearly were a mistake.
[For an even deeper look at what’s on Paul Krugman’s mind, sign up for his weekly newsletter.]
But blaming the Fed for the tax cut’s fizzle won’t wash. For one thing, the Fed has actually raised rates less than in previous economic recoveries. Even more to the point, the Trump economic team was expecting Fed rate hikes when it made its extravagantly optimistic forecasts. Administration projections from a year ago envisioned 2019 interest rates substantially higher than what we’re actually seeing.
Put it this way: The Trump tax cut was supposed to create a boom so powerful that it would not only withstand modest Fed rate hikes, but actually require such hikes to prevent inflationary overheating. You don’t get to turn around and claim betrayal when the Fed does exactly what you expected it to do.
Aside from blaming everyone but himself, however, how will Trump deal with the failure of his economic promises? He has taken to demanding that the Fed roll the printing presses, slashing interest rates and buying bonds — the actions it normally takes in the face of a serious recession — even as he claims that the economy remains strong, and unemployment is in fact near a historic low.
As many people have noted, these are exactly the actions Republicans, including Trump, denounced as “currency debasement” when unemployment was far higher than it is today and the economy desperately needed a boost.
Since the Fed is unlikely to oblige, what else might Trump do? Officials have floated, then retracted, the idea of a cut in payroll taxes — that is, a tax break for ordinary workers, rather than the corporations and wealthy individuals who mainly benefited from the 2017 tax cut. But such action seems unlikely, among other things because top administration officials denounced this policy idea when Obama proposed it.
Trump has also suggested using executive authority to reduce taxes on capital gains (which are overwhelmingly paid by the wealthy). This move would have the distinction of being both ineffectual and illegal.
What about calling off the trade war that has been depressing business investment? This seems unlikely, because protectionism is right up there with racism as a core Trump value. And merely postponing tariffs might not help, since it wouldn’t resolve the uncertainty that may be the trade war’s biggest cost.
The truth is that Trump doesn’t have a Plan B, and probably can’t come up with one. On the other hand, he might not have to. Who needs competent policy when you’re the chosen one and the king of Israel?
No People. No Process. No Policy.
The Trump administration is not prepared for a foreign policy crisis.
But the administration has not faced an actual national security crisis that tests it and us in a profound way. There is no shortage of possible candidates — a major terrorist attack; a debilitating cyberattack; an infectious disease outbreak; an incident with North Korea, Iran, China or Russia that escalates into a broader conflict. Yet no administration in modern memory has been less prepared to deal with a true crisis than this one.
I spent nearly 25 years in government, and almost as much time studying it. When it comes to the effective stewardship of our nation’s security — especially during crises — the most successful administrations had three things in common:
- people,
- process and
- policy.
People with the experience, temperament and intellectual honesty to give a president good ideas and to dissuade him from pursuing bad ones. An effective process that brings key stakeholders together to question one another’s assumptions, stress test options and consider second-order effects. And all of this in the service of developing clear policies that provide marching orders to everyone in an administration, while putting allies at ease and adversaries on notice about our intentions.
The George H.W. Bush administration’s handling of the end of the Cold War powerfully illustrates these principles. Mr. Bush, Secretary of State James Baker, the national security adviser Brent Scowcroft and a remarkable team of senior officials proved to be the right people in the right place at the right time. Mr. Scowcroft’s interagency process became a model for every successive administration until this one. The policies they pursued were clear, sustained and comprehensive. The Obama administration’s successes in bringing Osama bin Laden to justice and handling the Ebola epidemic were the results of similar strengths.
When it comes to people, process and policy, Mr. Trump’s administration has gone from bad to disastrous.
For two years, cooler heads like Defense Secretary Jim Mattis and the national security adviser H.R. McMaster served as something of a check on Mr. Trump’s worst instincts: invade Venezuela, withdraw from NATO, evacuate every American from the Korean Peninsula.Now, their successors — Secretary of State Mike Pompeo and John Bolton as national security adviser — are as likely to encourage Mr. Trump’s follies as to oppose them.
Equally important, the Partnership for Public Service has found that almost 40 percent of leadership positions requiring Senate confirmation remain unfilled across the administration — at last count 275 out of 705 jobs. About a third of the State Department’s 198 key posts are vacant. One-quarter of the administration’s departments are led by “acting” secretaries.
Under Mr. Bolton, the National Security Council headed by the president, the Principals’ Committee headed by Mr. Bolton and the Deputies Committee, which I once led and which coordinates policy deliberations, have gone into deep hibernation.
Some combination of these committees typically met multiple times a day. Now, it is reportedly once or twice a week at most. The result is greater control of the policy process for Mr. Bolton and fewer messy meetings in which someone might challenge his wisdom. Mr. Mattis, who once complained about death by meetings, protested to Mr. Bolton about the lack of them.
.. The absence of process has consequences. There were minimal efforts to prepare Mr. Trump for his summit with Kim Jong-un, the North Korean dictator, in which he unilaterally ended military exercises on the Korean Peninsula and mused about withdrawing all American forces. Nor was there a process to game out Mr. Trump’s recent decision to pull out of Syria — instead, the relevant committees scrambled after the fact to bring some order to Mr. Trump’s impulses. Even the welcome progress toward ending the 17-year war in Afghanistan has been hobbled by Mr. Trump’s arbitrary and then partly rescinded announcement that he was cutting forces in Afghanistan by half, thereby undercutting our leverage in negotiations with the Taliban.
As for policy, it’s the lifeblood of any administration. Secretaries, other senior officials, ambassadors and envoys all need to know what the policy is to explain it to others and bring predictability to our nation’s foreign engagements. Mr. Trump’s failure to develop policies — and his tendency to countermand them by tweet — have caused major confusion worldwide about where we stand on issue after issue. In a crisis, having clear policy principles is even more important. Take the meltdown in Venezuela. The administration deserves credit for leading the international isolation of the country’s illegitimate president, Nicolás Maduro. But there is no evidence it has a comprehensive strategy to advance a peaceful transition — or a Plan B if Mr. Maduro digs in or lashes out.
Axios reported that Mr. Trump likes to express his disdain for policy by citing the boxer Mike Tyson: Everybody has a plan until he gets punched in the mouth. It’s true that no policy fully survives first contact. But if you don’t spend time anticipating the shots you are likely to take, you wind up flailing about wildly. Which sounds a lot like Mr. Trump.
These past two years, most of our foreign policy setbacks have been modest, and mostly of Mr. Trump’s own making. These next two, we may not be so lucky.