Remember the economy?
As those who follow politics are well aware, one of the hallmarks of Bill Clinton’s first presidential campaign was the phrase, “It’s the economy, stupid.” It remains as relevant today, and there is some indication that, for a certain segment of the population, economic considerations were the nudge that put Donald Trump into the White House.
You wouldn’t know that given the actions of his first few weeks in office. Whining about his popular vote loss, picking fights with heads of state, and an attempted ban on Muslim immigration have been the headline-makers. It now appears that those very things could effect the economy in ways that will make him vulnerable.
The immigration ban, in particular, has brought a sour taste to the mouths of many, and the border patrol appears to be taking a much harder line than in the past. This week, a Canadian woman was denied entry into the US, despite having traveled between the two countries in the past. The woman is a Moroccan-born Muslim (Morocco was not on Trump’s “ban list”) who is now a Canadian citizen with a valid Canadian passport. Four additional Canadians have been denied entry since.
Additionally, the Trump administration has floated a plan that would require visitors to the US to give out social media passwords so that their accounts could be checked by Homeland Security. The invasiveness and unfriendly atmosphere created by the new administration has had global effects. A recent survey has shown that foreign interest in traveling to the US has declined by 17% in the first three weeks of the Trump presidency, with the only major exception being Russian tourists. Travel and tourism is a $500 billion industry, with an equal amount of indirect impact. It accounts for 5.3 million jobs. If tourism goes into a heavy slump, there will be a noticeable effect on both jobs and GDP.
There are other risks as well. The tech industry is heavily dependent on foreign workers, taking in around 200,000 per year. If people no longer want to come to the US, or are encountering difficulty, the industry will still employ those people, but do it outside the US. In fact, plans are already underway to make Vancouver a “Silicon Valley North” because of Trump administration policies.
Some of these policies have been tested by the states and found wanting. Both Georgia and Alabama cracked down hard on immigrants and found themselves short of workers. In Georgia, crop losses totaled $140 million due to a lack of immigrant workers. Similar effects were evident in Alabama. Now, with Trump’s tough talk, California farmers are also worried that field workers won’t show up to pick crops.
Meanwhile, Trump’s economic strategy seems to be a Potempkin Plan. While he has boasted about saving jobs or bringing them back to the US, in almost every case, the companies already had those plans in place before he took office. Indeed, to avoid the wrath of the president, corporations seem happy to let him take credit for their existing deals. The Financial Times quotes a lawyer who says, “People have understood that Donald likes to win and they need to play into that.” So there’s no actual economic benefit, the only thing affected is Trump’s ego, which the corporations are happy to feed in order to be left alone.
Trump’s other economic push is an attempt to bolster the coal industry, primarily by removing environmental regulations. But this is liable to generate a backlash, for one, and not likely to have a long-term effect. The economics of coal are such that natural gas has been steadily replacing coal for the past six years, and gas prices continue to fall, making the trend unlikely to reverse. While coal is still cheaper than solar power today, coal prices have remained essentially unchanged, while solar has dropped 20%/year, leading to a cross-over point as early as 2020.
While Trump will undoubtably benefit from Obama’s economic plans already in place, none of what he’s proposed seems poised to generate new growth, and there are black clouds on the horizon for the tourism industry. With similar issues in farming and some tech sector growth shunted toCanada, it won’t bode well for Trump. If the economy stagnates, all his bragging will do no good because the people who don’t have jobs will know that he’s responsible.
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