How Long Will Trump's Economic Boom Last?

Summary

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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)

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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.

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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.”

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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)

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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

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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.

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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.

Transcript

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[Dorothy Wickenden]

This is the Political Scene, a weekly conversation with New Yorker writers and editors about politics. It's Thursday, August 2nd, Dorothy I'm Dorothy Wickenden, executive editor of the New Yorker. This year, the US Economy is likely to show its highest growth in over 10 years. Unemployment has fallen to a little under 4%, the lowest point in almost two decades. More workers in construction and manufacturing are getting raises, there are fewer layoffs, and more jobs are being created. On Tuesday, at a Make America Great Again rally in Tampa, Florida, Trump described himself as the most popular person in the history of the Republican Party. He went on to take credit for the booming economy and to defend his escalating trade war with China.

[Donald Trump]

But everyone that greets me says hello, Mr. President, congratulations on what you've done for the economy. It's the talk of the world. Talk of the world. Now that we have the best economy in the history of our country, this is the time to straighten out the worst trade deals ever made by any country on earth. They are the worst.

[Dorothy Wickenden]

John Cassidy joins me to discuss the long term effects of the administration's economic policies on American workers and how they'll shape the midterm elections this fall and the presidential contest in 2020. John, welcome back.

[John Cassidy]

Thanks for inviting me on, Dorothy.

[Dorothy Wickenden]

So let's start with the basics. Markets don't usually like instability. And so when Trump took office, remember, many predicted that the economy is going to crash. That didn't happen. Why not?

[John Cassidy]

Yeah, I mean, it's a good question. I think two things have happened basically over the last year or so. First of all, the economy had quite a lot of momentum when Trump took over. We'd had already sort of eight years of steady growth. It wasn't fantastic. Historically. It was about 2%, 2.5%, but it was very steady. So the economy was in pretty good shape when Trump took over. And the predictions that it would suddenly fall off a cliff, I don't think took that into account. The second thing that's happened is in the last few months, the economy has actually accelerated quite a bit. Instead of having 2% growth, we basically jumped to around 3% over the first half of this year. And that, I think, is largely due to the policy initiatives of the last year. There are two things here. It's often just represented as a tax cut, and that was part of it. There was also a big spending increase at the start of this year as a result of an agreement between the Democrats and the Republicans in Congress. If you add those things together, the tax cut, which was the GOP bill passed in December, plus the spending increases agreed in February, it's actually quite a sizable fiscal stimulus.

[Dorothy Wickenden]

I want to interrupt you for a second, just because where have we seen the spending increase?

[John Cassidy]

All across the government, defense and non defense spending. You know, it's an increase of more than $100 billion in the year. If you add the tax cuts and the spending together, you get a total of about $275 billion, according to a study I just saw from the Peterson Institute in Washington. That's quite a considerable fiscal stimulus, especially for an economy which is already doing pretty well with low unemployment. You basically introduced a Keynesian stimulus very late in the economic cycle, and that has given a temporary boost that. Well, Republicans will claim it's permanent, but most economists would say it's a temporary boost to growth this year and early next year.

[Dorothy Wickenden]

And unemployment has been decreasing since 2014. And I wonder what the story is behind those numbers. Is anyone being left out?

[John Cassidy]

The big story, Unemployment. There are two parts, basically. During the Great Recession, there was a huge jump in unemployment. Unemployment rate went to 10%. But also in the Years following the recession, a lot of people dropped out of the labor market, stopped looking for jobs because they'd given up hope of finding them. So what we found in the last few years, basically we've had this steady economic growth of hiring of sort of 150, 200,000 people a month. It's gradually whittled down the unemployment rate from 10% all the way to 4% now. But also what we're finding is not just unemployment rates gone down in the last year or so, especially in the last few months, a lot of people who've given up working are coming back into the labor force. The labor force is getting bigger. Unemployment is basically the number of people in the labor force minus the people employed. So if the labor force goes up, you can have more people employed and the unemployment rate stays the same. That's basically what's happened over the last few months. Unemployment rate is basically sticking around 4%, but there's still a lot of hiring. And that's very good news because it means that people who previously had basically given up hope are now coming back into the economy and are finding jobs. And you can see that on a casual basis, employers are having great difficulty finding enough workers. And so they're even doing things which they wouldn't do in a less vigorous economy. They're hiring people who are coming out of prison, for example, which is obviously great news for them and great news for the economy. But also a lot of people who've taken early retirement are now sort of streaming back into the labor force. So that's all positive. The only question is how far can it go? Economists, some economists think we're basically at full employment now, and if growth continues like this, you're going to get an uptick in inflation. But so far that hasn't happened.

[Dorothy Wickenden]

So I have to ask the question here about supply side economics, because when Trump cut taxes on the wealthy, Democrats warned, as they always do when this happens, that we're going to be dangerously adding to the debt deficit and this is going to have a long term terrible effect on, you know, on the, on the economy overall.

[John Cassidy]

Yeah, I mean, there's always these labels are used. The Republicans call it a supply side tax cut. And in one sense it was because they cut business taxes. They slashed the business tax rate to 20%. That was a big giveaway to businesses, big giveaway to people who have stock in businesses. They also cut the capital gains tax rate. So that was a supply side. But at the same time, they did cut taxes on regular people too. It wasn't a huge tax cut for individuals, but there's a lot of individuals in the economy. And if you aggregate that together with a substantial tax cut, if you then add on top of that the increased spending, basically what you've got here is a demand side policy, not a supply side policy. The government is basically pumping more money into the economy. It's a stimulus package similar to the Bush stimulus packages back in 2000-2001-2002-2003. Any economic textbook will tell you that 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.

[Dorothy Wickenden]

John, why is Trump not emphasizing the economy more? He mentions it in these rallies and so on, but you would think that this would be his, you know, his one message he would be hammering home every day. Instead, he's distracted by any number of issues.

[John Cassidy]

There are two things here. One, although the economy is doing well, GDP is going fast, wages are basically stuck where they've been. If you look at last year and for inflation, they basically haven't risen at all. So even though the GDP figures are good, I don't think the public at large is sort of jumping up and down celebrating the increases in their living standards and wages. And I think the Republicans realize that. So Trump seems to have decided that rather than run on the economy and on the tax cut that was frantic to the rich, he's going to go back to his base issues, immigration and the war, because that's what gets the base out, rather than sort of good news about the economy. And you see it, it's not just Trump. You also see it in the Republican Party. I mean, the Republicans have got this very awkward special election in Ohio's 12th district next week, which is a solidly Republican district, and they should win it. John Kasich was a former congressman there. They've held it for 35 years. But it looks very close. Trump's going there on Saturday. The candidate, Troy Balderson is in trouble. The latest poll showing. And if you look at what he's running on, and now he's in trouble. He's not running on the strong economy. He's attacking Nancy Pelosi.

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[Dorothy Wickenden]

So what about the trade war? We're getting wildly conflicting signals on this from every quarter. Last week, Trump said that for now at least, the administration is not going to impose new tariffs against Europe. And so that policy seems not all that different from what Obama was pursuing. Is that right?

[John Cassidy]

Well, the parallel with Obama is that he's now resurrected this idea of a sort of transatlantic trade partnership. Now, Obama did that in sort of friendly fashion. He didn't slam tariffs on European goods and then threatened to slam tariffs on European cars as well. So basically, Trump has caused this enormous row. I mean, we've got to go back to how they started. It started about Chinese steel, but in trying to impose tariffs on Chinese steel, he didn't just impose them on China, he imposed them on all over the world, including the eu. That caused a big rout. Obviously, the EU retaliated by imposing tariffs on some American goods, like Harley Davidson, then Jim Beam, whiskey, et cetera. Trump then retaliated that and said, we're thinking about imposing tariffs on European cars, BMWs, Mercedes, et cetera. That would be a huge escalation. Europeans then said, okay, it looks like we're going to be a full scale trade war. And then Trump has basically called a halt to that and backed down. When the chairman of the European Commission came to Washington last week, Juncker, they cut this deal where they basically agreed to start negotiating, leave the tariffs as they are, but not expand them. And there's going to be negotiations about this free trade agreement because the EU.

[Dorothy Wickenden]

Basically agrees with the US Right, that China is committing unfair practices in trade.

[John Cassidy]

But did Trump need to launch a trade war with Europe in order to get them on the side with going against the Chinese? No, he didn't at all. The Europeans are already willing to back the US in the World Trade Organization, et cetera. So basically, Trump alienated the allies he needed, and then when they retaliated, he's now called a halt and said, well, maybe we'll actually be allies after all and go after the Chinese together. That's basically what's happened. And the big question is, will he actually go ahead with the Chinese tariffs? He's.

[Dorothy Wickenden]

Well, yes. Didn't he say he was considering doubling the tariff he'd already imposed?

[John Cassidy]

But we now know that's his bargaining tactics. So it seems like that's what he's doing with the Chinese. He's raising the stakes and raising the.

[Dorothy Wickenden]

Stakes, although they seem less inclined to play this game.

[John Cassidy]

Well, that's the thing the Chinese will go. So far they've already indicated what they're willing to do. The Chinese basically are willing to increase their purchases of U.S. goods, U.S. farm goods, et cetera, basically increase U.S. exports. But what they're not willing to do, it seems, is make a sort of change to their longer term practices of supporting industries, of making American firms who go into China hand over some of their intellectual property, basically mercantilist pro Chinese policies which can adversely affect European and American firms who do business in China. They seem very reluctant to give up those practices.

[Dorothy Wickenden]

How politically risky is this strategy for Trump? You know, he says tariffs are the greatest and we see what he's trying to do. But he also had to offer billions of dollars to help farmers here who are hurt by these tariffs. And we've seen news stories about how the tariffs are already hurting farmers and manufacturers in Pennsylvania, among other states, you know, which is a key swing state in November.

[John Cassidy]

Right. Well, I mean, there are vulnerabilities in the sort of contradictions in the Republican coalition. And that's basically what's emerged over the last three months. Trump can get the sort of steel workers in the Midwest and people of that look to support his trade wars. He's basically going after what they see as their rivals and enemies. But the Chinese and the Europeans then retaliate against another part of the Republican coalition, the farmers. US Farming exports are huge. Basically, America is the world leader in agriculture and that's bedrock Republican territory, Iowa, Nebraska, et cetera. And 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.

[Dorothy Wickenden]

And what do you see in response by governors and farmers themselves as they begin to sort of contemplate how this is going to affect them?

[John Cassidy]

From all the reports I've seen, the farmers would much prefer pre trade than, than handouts from the government. I think Trump didn't realize how sort of integrated American agriculture is. And China is now the biggest purchaser of a lot of American products like soybeans and pork, et cetera. It's a sort of bit of a return to the late 19th century when America started supplying Europe with food. It's now supplying China with a lot of food. So I don't think he'd sort of figured that in and in the long term, it would be far too expensive to basically subsidize all These farmers and close their markets. And the farmers themselves much prefer to trade than to get government handouts.

[Dorothy Wickenden]

And free trade is just a bedrock principle of the Republican Party. So how is this going to affect the party as we go into these elections?

[John Cassidy]

That's Trump's problem. Right. How does he manage the Republican coalition? Free trade is a fundamental tenet of the old Republican Party. The sort of pro corporate Paul Ryan, Mitch McConnell, you know, Mitt Romney, Republican Party. But it's certainly not a tenet of the Trump Steve Bannon Nationalist Protectionist party. 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 who back the party, like the Koch brothers, for example.

[Dorothy Wickenden]

Yeah. And there's a lot of money at stake there.

[John Cassidy]

Yeah. I mean, it's sort of hard to see the cops are actually going to flip and support Democrats, support pro free trade Democrats. But there could easily be a fracturing in the Republican Party here if Trump carries on down this road.

[Dorothy Wickenden]

How concerned are you about the financial market? So do you anticipate another possibly terrifying drop?

[John Cassidy]

Well, you know what I mean, Dorothy. I'm always a bit of a bear.

[Dorothy Wickenden]

I do. I didn't want this podcast to end on too hopeful a note.

[John Cassidy]

No, no, I'm not. I mean, you never know in stock market. The stocks are very highly valued. We've had an incredible bull run since 2009. You know, stocks have basically tripled. So at some point one would expect a correction in the markets. Full scale trade war could certainly kick that off. What's more likely, I think is sort of economic problems in 2020 rather than in 2018. Trump's basically gee ed up the economy this year pretty successfully for the midterms, although it doesn't seem to be helping the Republicans that much. But the long term outcome could be unfavorable for him because basically things are sort of as good as it gets this year and maybe early next year. We're getting rapid growth. But as you go into sort of 2019 and 2020 especially, there's going to be some factors which are much less favorable. The stimulus which I talked about, is going to fade, for one thing. And at the same time, the Federal Reserve is raising interest rates and removing the monetary stimulus that we've had for the last 10 years. I've been speaking to economists on Wall street and elsewhere. The last the sort of rising worry that there's even a possibility of a recession in 2020, just in time for the election.

[Dorothy Wickenden]

And what do you think the effect will be if Democrats win a majority in the House in November? Is that likely to affect Trump's economic policies?

[John Cassidy]

It's a good question. I mean, most people think it'll be deadlocked on any of Trump's protectionist policies, I think, or any of his social policies. There'd be complete deadlock there. Question is whether he could reach some accommodation with Chuck Schuman, the Democrats on spending policies, et cetera. Some sort of free market. Republicans fear that Trump could do 180 and start agreeing investment in infrastructure. Infrastructure, yeah, with the Democrats. And I mean, the deficit's already very high. It's already 5% of GDP. But Trump doesn't seem to give a hoot about the deficit, so I don't think that would put him off.

[Dorothy Wickenden]

Thanks so much, Don. I'm going to have you come back after the election.

[John Cassidy]

Thanks very much, Dorothy.

[Dorothy Wickenden]

John Cassidy is a staff writer and a columnist for newyorker.com this has been the Political Scene from the New Yorker. You can subscribe by searching for the New Yorker in your podcast app and find more political analysis and commentary on newyorker.com feel free to rate and review the political scene on Apple Podcasts. This program is produced by Alex Barron and Hannah Wilentz. For New Yorker.com I'm Dorothy Wickenden.

[Katie Drummond]

I'm Katie Drummond. I'm Wired's global editorial director. I'm Michael Kollory, Wired's director of consumer, Tech and Culture.

[Dorothy Wickenden]

And I'm Lauren Good. I'm a senior correspondent at Wired. And our show Uncanny Valley is about the people, power and influence of Silicon Valley.

[Katie Drummond]

And right now, Silicon Valley and Washington have never been more intertwined. So each week we get together to talk about a big story, often at the intersection of tech and politics.

[Tristan Redman]

Right?

[Katie Drummond]

So whether we're talking about Trump, Coin Doge, or Elon Musk, we will always explain how these Silicon Valley forces are affecting Washington and how they affect you. Make sure you're following Uncanny Valley in your podcast app of choice so you don't miss an episode.

[John Cassidy]

From PRX.