Tariffs are just the latest of Donald Trump’s econ-optical illusions

(adobe stock)

If there’s one thing the experience of the last few years has underscored, it’s the societal importance of rising pay to national harmony.

The best way to achieve that, of course, is through economic growth. When the growth is low and pay is stagnant — or increases are unevenly spread across regions or demographics — economically squeezed populations grow discontented. Latent class, regional, and racial resentments become charged as people look for scapegoats.

That creates a fraught political climate, one in which a candidate peddling cheap nationalism can prosper with false charges and specious solutions. Charges, say, that conniving foreign countries have stolen our jobs, or that this country’s financial elite have betrayed America with free-trade deals that have lined their pockets while stealing the livelihoods of American workers. And that it can all be fixed by someone determined to put our national interest first and make American great again.

Once the election is over, fantasyland fades and the real world reasserts itself. In year one of Donald Trump’s presidency, economic growth was about 2.3 percent. That’s up from 1.6 percent in 2016, but only a sliver over Barack Obama’s second-term annual average of 2.2 percent. It’s hardly the heady resurgence about which Trump regularly boasts.


So what does a nationalist president do to provide a sense of improving circumstances, particularly for his voters? Let’s start with this week’s development: tariffs on aluminum and steel. That will help workers in those specific industries. But tariffs bring about a transfer of dollars from consumers to the stockholders and workers in the protected industry. Why? Because to protect more expensive American products, tariffs raise the cost of foreign competitors’ products. The result: Manufacturers who use steel or aluminum face higher costs — and of course will pass those costs along to consumers in the form of higher prices for their goods.


Now to the GOP’s $1.5 trillion tax cut package. Although targeted toward businesses and upper earners, it has put more money in most pockets. And it will certainly have some limited growth effects. But at what — and at whose — cost?

The GOP tax cut isn’t offset up front. Instead, it will be paid for by borrowing, which means it will push the cost of boosting today’s paychecks onto future taxpayers. Further, by putting us on the course for a return to trillion-dollar-plus annual deficits, this tax cut will create pressure for larger adjustments to Medicare and Medicaid (and possibly Social Security) than would otherwise be necessary.

Then there are Trump’s linked efforts to revive the coal industry and provide Americans with cheaper energy, goals he’s pursued by canceling Barack Obama’s Clean Power Plan,

taking the United States out of the Paris climate agreement, and stripping away other regulations.

Two big problems: Obama’s power plan, which had been enjoined by the Supreme Court, really wasn’t the coal-crippling culprit. That was mostly the invisible hand of the market, in the form of cheaper shale gas. Yes, there has been a small uptick in US coal production and employment under Trump, but that’s been driven by a shortage of coal for steel-making needs, not a reversal of long-term trends. The effect here isn’t likely to be big one way or the other. Further, in the unlikely event that Trump did manage to revive the coal industry, the cost would come in accelerating global warming. As with the tax cut, then, the consequences would be borne by future generations.


Now, none of this is completely apparent, so perhaps Trump will be able to camouflage the real costs and consequences of his policies. But let’s be clear: So far, what we’re seeing is more the illusion of improvement than a genuine delivery of real, robust economic growth.

Scot Lehigh can be reached at Follow him on Twitter @GlobeScotLehigh.