In a column for Bloomberg (subscription required) it is noted that the U.S. economy is showing signs of slowing and Donald Trump has had a major hand in dragging it down after being handed robust economic growth by former President Barack Obama.
According to Justin Fox — author of “The Myth of the Rational Market” — Obama was initially hampered by the “Great Recession” that had the markets reeling and wondering if they would ever bounce back, which they did, and Trump was deal a better hand and fumbled it.
“From his saber-rattling on trade to his threats of a government shutdown over the border wall to his browbeating of the Federal Reserve to his unending stream of obstreperousness on Twitter, President Donald Trump certainly has been the source of lots of headlines that might cause one to wonder what’s next for the economy,” Fox wrote. “Back in 2010, you may remember, business groups and conservative (and centrist) pundits argued that ‘policy uncertainty’ under President Barack Obama was holding back the U.S. economy. A lot of this seemed to be just a new way of getting in partisan digs.”
Relaying that in 2011 noted economists Scott R. Baker, Nicholas Bloom, and Steven J. Davis created an “’economic policy uncertainty index’ based on searches of newspaper archives for certain terms, as well as measures of tax code changes and disagreement among economic forecasters,” he points out that it has jumped even higher from the early Obama years to where the U.S. stands now after over two years of the Trump administration.
“Policy uncertainty in the U.S. hit a new all-time high in January, surpassing the record set immediately after the debt-ceiling standoff of 2011. It’s declined since then, but is still at levels similar to those of 2010,” he wrote. “President Donald Trump’s trade brinkmanship has driven a lot of the increase. Baker, Bloom, Davis, and Kyle J. Kost reported in a 2019 paper on equity market volatility that 26% of newspaper articles on the stock market’s December 2018 fluctuations referenced trade policy. ”
Speaking with Steven J. Davis — a professor at the University of Chicago’s Booth School of Business — Fox notes that the “global uncertainty index is 70% higher now than it was during the worst global financial crisis in generations” and asked if current U.S policies are a major culprit.
“He replied via email with a “yes” and a list of seven culprits leading with “U.S.: Trade policy, tensions with China, tensions with allies,” then Brexit and ending with “Geopolitical conflicts involving Iran, Iraq, Israel, Saudi Arabia, Yemen.”
“That’s a lot to be uncertain about!” he wrote before adding, “One can see why the experts keep talking about a global economic slowdown. Then again, uncertainty was quite low both in the U.S. and globally in 2000 and 2007, only to give way each time to rising economic policy uncertainty levels and economic trouble the following year. The only thing worse than uncertainty might be misplaced certainty.”
You can read the whole piece here (subscription required).