Krugman: Trump Could Make Some Right Economic Decisions for All the Wrong Reasons
Paul Krugman is just as terrified as the rest of America at the prospect of a Trump presidency. As he laments in his Monday column, "Installing Donald Trump in the White House is an epic mistake. In the long run, its consequences may well be apocalyptic, if only because we have probably lost our last, best chance to rein in runaway climate change."
When it comes to the economy, however, Krugman reveals a potential surprise amid the agony. Rather than an immediate recession, he notes, "don’t be surprised if economic growth actually accelerates for a couple of years."
While Krugman intially believed "a global recession was imminent," after digging deeper, he explains that the short-term effects on the economy may not be immediately dire. He breaks the reasons down into two categories: general principles and the specifics of our current economic climate.
First, he reminds us of these general principles:
There is always a disconnect between what is good for society, or even the economy, in the long run, and what is good for economic performance over the next few quarters. Failure to take action on climate may doom civilization, but it’s not clear why it should depress next year’s consumer spending.
Or take the signature Trump issue of trade policy. A return to protectionism and trade wars would make the world economy poorer over time, and would in particular cripple poorer nations that desperately need open markets for their products. But predictions that Trumpist tariffs will cause a recession never made sense: Yes, we’ll export less, but we’ll also import less, and the overall effect on jobs will be more or less a wash.
It's the specifics of our current situation where the right decisions for the wrong reasons come in. As Krugman reminded us in a column in 2008, "virtue is vice, caution is risky, and prudence is folly.” He continues, "Specifically, we’d stumbled into a situation in which bigger deficits and higher inflation were good things, not bad. And we’re still in that situation — not as strongly as we were, but we could still very much use more deficit spending." Donald Trump is not exactly a stranger to excess spending.
Despite the fact that much of the tax cuts are going to those who need them the least, "Donald Trump isn’t proposing huge, budget-busting tax cuts for the wealthy and corporations because he understands macroeconomics. But those tax cuts would add $4.5 trillion to U.S. debt over the next decade — about five times as much as the stimulus of the early Obama years." We may be looking at "an accidental, badly designed stimulus."
Before he lets readers get too hopeful, or perhaps storm his office with pitchforks decrying his apparent calm, Krugman says in no uncertain terms that first of all, "we’re about to see a major degradation in both the quality and the independence of public servants. If we face a new economic crisis — perhaps as a result of the dismantling of financial reform — it’s hard to think of people less prepared to deal with it."
Second, and perhaps most heartbreaking, "Trumpist policies will, in particular, hurt, not help, the American working class; eventually, promises to bring back the good old days — yes, to make America great again — will be revealed as the cruel joke they are."
He promises more on that in future columns. We'll be listening.