|A flash commentary on the Trump victory by the British Marxist economist Michael Roberts:
1. Despite the widespread perception of a “white working class revolt”, most of the US working class, as usual, didn’t vote.
2. The economy was a far more important issue for those voting than terrorism or immigration.
3. Trump’s tax cuts, mostly benefiting the rich, will be paid for by massive cuts to social programs.
4. Trump has inherited a “poisoned chalice”; falling corporate profits herald a looming US recession.
5. Unlike the 2007-09 financial crisis and recession, the US has no monetary and fiscal policy tools left to avoid or escape from the next slump.
I agree with the first four points, not the fifth.
There’s no economic reason why - as Roberts curiously suggests, echoing conservative economists - that the US can’t again resort to “printing money or cutting interest rates or…increasing government spending when public sector debt has already doubled to 100% of GDP.”
If the Republican Congress and Fed don’t loosen monetary policy or boost government spending, it will be for ideological reasons rather than technical concerns over the debt-to-GDP ratio. Most economists, both mainstream and heterodox, reckon that there is still a huge amount of spare capacity to stimulate the economy without triggering inflation. It is not, as Roberts argues, that “the economic policy tools have been used up”, but that there is not the political will to use these.
It’s certain that Trump and the Republicans will not meet the exaggerated expectations of their voters, even had they the political will to do so. Despite Trump’s grandiose boasts about creating millions of new jobs and sharply boosting growth, they will more likely preside over a deep recession and rising unemployment. They will move to further cut social security and other working class gains contemptuously scorned as “ entitlements”.
Ironically, it is the Democrats who may be seen in retrospect to have dodged a bullet. They will not be burdened with responsibility for the next crisis if it comes, and US political demography is trending their way. Barring a major internal crisis and mass defections from the party, they’ll enjoy the luxury in opposition of presenting themselves as change agents in opposition as they did at the end of the George W. Bush presidency.