The Political Scene | The New Yorker

Episode Title: How Long Will Trump’s Economic Boom Last?
Date: August 2, 2018
Host: Dorothy Wickenden
Guest: John Cassidy (Staff Writer & Columnist, newyorker.com)

Overview

This episode centers on the robust U.S. economic expansion during 2018, widely touted by President Trump as evidence of his policies’ effectiveness. Executive Editor Dorothy Wickenden speaks with New Yorker financial columnist John Cassidy about the roots and sustainability of current economic growth, the effects of recent tax and spending policies, the real impact on American workers, and how these dynamics may shape the upcoming midterm elections and beyond. The episode critically examines Trump’s economic claims, the brewing trade war, and the potential political and market risks ahead.

Key Discussion Points & Insights

1. The State and Causes of Economic Growth

• Momentum Before Trump:
  • The U.S. economy already had “eight years of steady growth” at around 2%-2.5% before Trump took office (03:04).
  • Predictions that Trump’s presidency would tank the economy misunderstood this momentum.
• Recent Acceleration and Policy Effects:
  • Growth picked up to nearly 3% in the first half of 2018, largely due to significant tax cuts and increased government spending.
  • Cassidy: “If you add those things together ... it's quite a sizable fiscal stimulus.” (04:20)
• Nature of the Stimulus:
  • It’s “Keynesian stimulus very late in the economic cycle,” providing “a temporary boost” (04:45).
  • Total estimated impact: $275 billion, combining tax cuts and spending increases.

2. Unemployment and Labor Market Realities

• Falling Unemployment:
  • Unemployment had been declining steadily since 2014, now near 4%—lowest in almost two decades.
• Labor Force Dynamics:
  • More previously discouraged workers are re-entering the labor force.
  • Employers face labor shortages, leading to the hiring of people formerly shut out, like ex-prisoners or early retirees (05:07).
• Wages:
  • Despite strong employment numbers, real wage growth remains stagnant.
  • Cassidy: “Wages are basically stuck where they've been ... They basically haven't risen at all.” (08:33)

3. Tax Cuts: Supply Side or Demand Side?

• Structure of the GOP Tax Cuts:
  • Business tax rates slashed, but there were individual cuts too.
  • Cassidy argues it functions more as a “demand side” stimulus due to combined spending and tax cuts (07:16):
    • “If you cut taxes and increase government spending, you're going to get an increase in growth, at least for a while. And that's what we've seen.”

4. Trump’s Economic Messaging and the Politics of Prosperity

• Economic Triumph Not Foremost in Messaging:
  • Despite good GDP numbers, the White House rarely centers the economy in its political messaging, instead favoring divisive base issues like immigration.
  • Cassidy: “Even though the GDP figures are good, I don't think the public at large is ... celebrating the increases in their living standards and wages.” (08:33)
• Midterm & Electoral Strategy:
  • The show references a special election in Ohio, noting GOP candidates are not emphasizing the economy but attacking Democratic opponents instead.

5. The Trump Trade War: Tactics and Risks

• From Steel Tariffs to Global Repercussions:

  • Trump’s steel tariffs hit allies and China alike, sparking retaliation from the EU (Harley Davidson, whiskey, etc.).
  • After escalation, “Trump has basically called a halt to that and backed down,” beginning negotiations instead (11:44).

• China as Primary Target:

  • EU was always predisposed to cooperate with the U.S. on China. Trump’s approach alienated natural allies without necessity.
  • Chinese concessions likely to be limited to increasing U.S. imports, not changing core domestic policies (12:40).

6. Political and Economic Repercussions of Trade Tensions

• Domestic Political Risks:
  • Farmers, a key Republican constituency, are hurt by retaliatory tariffs.
  • Cassidy: “Trump is sort of trying to, you know, square the circle here by keeping the trade war going. But he's forced to then buy off various Republican constituencies who are hurt by it.” (13:41)
• Republican Party Schism:
  • Long-standing GOP free trade principles are clashing with Trump’s nationalist approach, risking fractures among pro-business and more populist wings.
  • Cassidy: “They're trying to transform the party into more of a sort of white workers party. And in doing that, they're running afoul of the pro global corporate people who back the party, like the Koch brothers.” (15:31)

7. Financial Markets and Economic Outlook

• Market Fragility:
  • Markets are “very highly valued” after a near-decade bull run (16:31).
  • A “full scale trade war could certainly kick that off.”
• Longer-Term Prospects:
  • The effects of the fiscal stimulus are “as good as it gets this year.”
  • Risks: stimulus fades, Fed tightens rates, possible recession in 2020.
  • Cassidy: “The last ... rising worry that there's even a possibility of a recession in 2020, just in time for the election.” (17:50)

8. What If Democrats Win the House?

• Potential Policy Deadlock:
  • Economic policymaking will grind to a halt on protectionism and social issues.
  • But Trump could “do a 180 and start agreeing investment in infrastructure” with Democrats—even with a high deficit (17:59).
  • “Trump doesn't seem to give a hoot about the deficit.”

Notable Quotes & Memorable Moments

• President Trump addressing the economy at a rally:

  "Everyone that greets me says hello, Mr. President, congratulations on what you've done for the economy. It's the talk of the world." — Donald Trump (02:03)

• Cassidy on the fiscal stimulus impact:

  "If you add the tax cuts and the spending together, you get a total of about $275 billion ... quite a considerable fiscal stimulus, especially for an economy which is already doing pretty well." (04:20)

• On non-economic messaging:

  "Even though the GDP figures are good, I don't think the public at large is ... celebrating the increases in their living standards and wages." — John Cassidy (08:33)

• On trade war contradictions:

  "The Chinese basically are willing to increase their purchases of U.S. goods ... but what they're not willing to do, it seems, is make a sort of change to their longer term practices ..." — John Cassidy (12:40)

• On political coalitions:

  "They're trying to transform the party into more of a sort of white workers party. And in doing that, they are running afoul of the pro global corporate people." — John Cassidy (15:31)

• Economic worries for 2020:

  "The last ... rising worry that there's even a possibility of a recession in 2020, just in time for the election." — John Cassidy (17:50)

Timeline of Important Segments

• 01:16 – Dorothy Wickenden introduces the economic theme and Trump’s self-congratulation
• 02:03 – Trump’s comments about economic “talk of the world”
• 03:04–04:58 – Cassidy on inherited economic momentum, tax cuts, and spending increases as stimulus
• 05:07–06:55 – Unemployment’s fall, labor force participation, and wage stagnation
• 07:16–08:18 – Analysis of tax cuts: supply side vs. demand side, and macro impact
• 08:33–09:41 – Why the White House doesn’t focus on the economy in politics
• 10:12–12:22 – Trade war origins, escalation, and retreat; comparison to Obama-era policies
• 12:40–13:41 – China’s stance and the limits of possible trade concessions
• 13:41–15:21 – Political fallout: farm bailouts, Republican coalition strains
• 15:31–16:09 – Republican party identity crisis over trade
• 16:23–17:50 – Markets, fears of correction, and possible recession on the horizon
• 17:59–18:35 – Prospects of Congressional deadlock and possible Trump-Democrat deals

Summary Tone

The conversation is measured, analytical, and gently skeptical—balancing acknowledgment of economic data with a critical look at underlying factors, sustainability, and the gap between headline growth and everyday experiences. Cassidy brings nuanced skepticism, and Wickenden’s questions clarify how economic facts interface with political realities.

For listeners seeking a sharp, accessible take on U.S. economic conditions under Trump, the state of the labor market, and rising political risks on the horizon, this episode is essential listening.