Bernanke was right, Trump was wrong
Monday, May 13, 2019
A robust economy with the lowest unemployment rate in 50 years is President Trump’s argument for reelection. He reached his high-water mark in the polls this week with 46 percent approval, making him a slight favorite to win a second term.
This undue credit for the economy is how the system works. Every president gets the credit or the blame for what happens on his or her watch.
President Obama handed off an economy in 2017 that was ready to soar for whichever candidate won the election. Obama gets credit for his calm and steady leadership through the Great Recession, but the real hero of that scary time was Ben Bernanke, chairman of the Federal Reserve, a Republican appointee.
Bernanke was a student of the Great Depression. He understood that the massive deficit spending in World War II took us out of that economic catastrophe, that it was Keynesian spending that saved the country. To combat the 2008-2009 recession, Bernanke turned to quantitative easing, a fancy term for printing money when the Fed buys Treasury bills (T-bills) and other financial instruments.
Even with that infusion of government money, it took a decade for the housing market to recover. And wages only started rising toward the end of the Obama administration.
To use a golf metaphor, Obama with Bernanke’s advice and counsel drove the ball a long way to enable Trump to successfully putt it out.
Putting requires patience and finesse, qualities not associated with Trump. We shouldn’t be surprised that Trump went for a budget-busting tax cut that reduced taxes mostly for the wealthy and corporations. The corporate tax rate went from 35 to 21 percent.
Unlike the tax cut for the wealthy, the reduction in the corporate tax rate was needed, but such a drastic cut was too much, too fast. It created a huge burst of corporate earnings and added to the growing inequity between the rich and the struggling middle class.
Many companies used their tax windfall to buy back stock, not to create jobs, increasing cynicism among the voters. However, like quantitative easing, the tax cut did invoke Keynesian flooding of the economy with money.
It should have been accomplished in slower increments, for unlike quantitative easing, it exacerbated the national debt for the benefit of wealthy stockholders, Donald Trump among them.
The House Ways and Means Committee has requested Trump’s personal and business tax returns for the last 10 years, which would provide more timely information about the sources of his money to continue to fund his lifestyle and his business empire.
Any other real estate developer in New York in 2007 would have seen the value of their holdings drop by as much as 50 percent, but not Trump. His son, Donald Trump Jr. said in 2008 at a New York real estate conference, “We see a lot of money pouring in from Russia."
The Senate Intelligence committee, which is led by North Carolina Republican Richard Burr, subpoenaed Trump Jr. to appear before the committee to explain the discrepancy between what he told the committee in 2017 about a meeting with the Russians in 2016 at Trump Tower, and what the Mueller Report revealed.
Sources described as close to Trump Jr. assailed Burr as “cowardly,” and a RINO (Republican in Name Only). A booming economy can only get Trump elected if Republicans ignore how he is pushing the boundaries of our democracy to further his and his friends’ personal and business interests.
Now, as the stock market and national debt soar to the heights, it is becoming increasingly clear that Bernanke’s quantitative easing was on the right track and Trump’s budget-busting tax cut was on the wrong track.
Washington Merry-Go-Round, the nation’s longest-running column, presents today’s events in historical perspective. Douglas Cohn and Eleanor Clift are veteran commentators.