America’s boldest fiscal experiment for half a century is yielding some surprising results, and Donald Trump isn’t done experimenting yet.
The president, who’s promised more tax cuts as his party heads into midterm elections, has already driven the budget into uncharted territory. Several predecessors have injected a bigger stimulus during recessions. But not since Lyndon Johnson was trying to build a Great Society, while also fighting the Vietnam War, has so much deficit-spending been unleashed into a growing economy.
Generosity on that scale is often supposed to please voters, who enjoy a sugar-high in the short term, while terrifying investors who take a longer view. What’s striking about the Trump stimulus so far is that neither of those things appears to be happening.
Bonds have edged lower, and they extended declines on Wednesday when the Treasury said that debt issuance to finance the Trump shortfall is about to surpass levels reached after the 2008 crisis. Still, there’s been no big selloff. By historical standards it remains cheap for the government to borrow.
‘Messaging Battle’
Meanwhile, fiscal stimulus has juiced the economy -- but even the fastest growth in four years hasn’t made Trump’s tax overhaul a hit on the campaign trail, according to internal polling by his own party. By a 2-to-1 margin, respondents said the measures favored large corporations and the rich over ordinary Americans. “We’ve lost the messaging battle,’’ the Republicans concluded.
Trump responded with a new message -- one that caught even Republicans off guard and may not materialize anytime soon. He promised another 10 percent income-tax cut, this time targeting the middle class.
December’s reduction in corporate taxes was promoted as a measure that would help all Americans –- by boosting their pay. When Trump’s Council of Economic Advisers published a paper defending the plan, it began with the sentence: “Wage growth in America has stagnated.’’
A year later, even with unemployment at the lowest in a half-century, Americans still aren’t getting the kind of pay raises that were commonplace before the Great Recession. The resulting economy has a split personality. Both sides are on display in places like Green Bay, Wisconsin.
‘Economy’s Humming’