The Microeconomics of Donald Trump
A Look Back and Ahead
by clifford winston
cliff winston is a senior fellow at the Brookings Institution’s Economic Studies Program and coauthor of Revitalizing a Nation: Competition and Innovation in the US Transportation System (Brookings, 2024).
Published February 12, 2024
Donald Trump, we’ve all gotten the picture by now, doesn’t draw inspiration from the careers of celebrated statesmen and statewomen, or plow through scholarly tomes for insights on how to govern. But he did spend four years in the White House, so there’s a record of what he did — and thus there’s probably no better source of clues into what he would do if he managed to catch the brass ring once again.
In this essay, I glance back at his economic policies. No, amend that: his microeconomic policies. While few voters seem to understand this, macroeconomic performance — aggregate impact on jobs, growth and productivity — is largely beyond the control of the president. But the economy’s “micro” performance — the health of markets and their effects on consumers — does have a lot to do with the president’s actions across a range of issues.
And here, Trump’s first term offers little reason for optimism, at least from my perspective as a political independent and a mildly right-of-center microeconomist. Indeed, there is little in his record of governance to suggest that his policies will promote competition to the benefit of consumers or that he will use the levers of government to accelerate technological progress.
The Big One
The most damaging market failure of our time is the delay in coming to grips with greenhouse gas emissions that are warming the planet. Even if one does not believe the climate is changing — a hard belief to hang onto in the face of the science, not to mention the record of accelerating weather disasters — there can be no disagreement that pollution is a negative “externality” that should be contained efficiently with extra-market incentives, such as by taxing polluters according to the damage that pollutants do to the environment and human health.
Trump, alas, has never expressed support for creating incentives of any sort, market-based or otherwise, to reduce emissions of carbon or methane, or for that matter, even for acknowledging that fossil fuel use is a threat. Indeed, his administration fought efforts to phase out coal-fired electricity generation and mocked the expansion of private-sector investment in wind energy, the lowest-cost alternative energy source in much of the country. Then, too, he withdrew from the Paris Agreement that obliges signatories to reduce GHG emissions, thereby giving aid and comfort to other countries that are happy to “free ride” on the efforts of others to contain climate change.
The government has discretion to enforce a string of laws designed to curtail firms’ anti-competitive behaviors that raise prices, reduce output and slow innovation. The extent of anticompetitive behavior in the United States is a matter of scholarly debate, but Trump has shown no interest in taking sides. Instead, his administration largely used antitrust policy as a tool for retribution. For example, there is good reason to believe that the White House attempted to block the merger between AT&T and Time Warner because Time Warner owns CNN, which Trump viewed as a partisan enemy. He has also telegraphed support of antitrust prosecution of Big Tech as payback for their actions to limit his reach on social media after January 6.
The Trump’s administration’s efforts to reduce visas for skilled workers as part of his war on immigration constituted a threat to the nation’s ongoing technological progress. Fortunately, his attempt to choke off entry was parried by the courts.
Trump’s lack of focus on the value of competition is further reflected in his longstanding opposition to free trade. His administration imposed tariffs on imports from China and other countries and he withdrew from trade agreements, costing consumers billions of dollars in higher prices and raising costs for American manufacturers dependent on imports — notably steel and aluminum. Looking ahead, he recently proposed a new 10 percent tariff on all goods imported to the United States, which, if implemented, would effectively raise taxes on consumers by $300 billion annually and add to their anxiety about inflation.
This thrust toward protectionism has been felt in other markets, too. Deregulation of air, truck and rail transport in the last quarter of the 20th century greatly benefited consumers and shippers by unleashing competition, which reduced both costs and prices and spurred technological advance. Parts of the transportation system are still regulated to prevent foreign firms from competing with U.S. firms. But the Trump administration ignored opportunities to build on transportation deregulation’s successes by eliminating this barrier to competition.
Specifically, his administration remained aloof from efforts to give foreign airlines rights to compete on U.S. domestic routes. Imagine the shakeup if Ryanair and easyJet could bring their aggressive price-cutting to the U.S. — or even if giant legacy carriers like British Airways and Lufthansa could tangle with their counterparts United, American and Delta on US long-distance routes. His administration also spurned an opportunity to increase competition in ocean shipping by failing to eliminate the Jones Act, which greatly limits foreign ships from competing with U.S. ships.
Trump originally campaigned for office with the promise of massive infrastructure renovation, but his administration failed to advance any infrastructure legislation through Congress. The lower-profile but almost-as-important lapse on this front, however, was his administration’s unwillingness to press for the privatization of infrastructure services that have plainly failed as public entities.
Take air traffic control. Nav Canada has been widely acknowledged as an example the U.S. could follow by spinning off the Air Traffic Organization from the Federal Aviation Administration and running it as a nonprofit. Trump initially backed this change, but he inexplicably pulled his support, so the bill never made it to the floor of Congress.
Public airports are another widely unloved infrastructure service ripe for smart privatization. Several large metros, including Atlanta, Seattle, Minneapolis, San Diego and Denver, are served by public monopoly airports. Privatizing airports would lead to new airports throughout the country. More airport capacity would result in greater airline competition, which could reduce fares. By the same token, the Trump administration could have explored privatizing some highways and allowing them to compete for travelers by improving the efficiency of road travel.
Economists aren’t certain why technological change flourishes in some places and times, and languishes in others. But they do agree that America’s immigrants contribute a disproportionate share of U.S. inventions, and that the free movement of skilled labor keeps the wheels of innovation turning. Thus, the Trump’s administration’s efforts to reduce visas for skilled workers as part of his war on immigration constituted a threat to the nation’s ongoing technological progress. Fortunately, his attempt to choke off entry was parried by the courts. There is no guarantee, though, that he wouldn’t succeed in a second term.
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Even when the consequences are real — the inflated price of tradable goods caused by tariffs, mounting traffic jams at rush hour, waves of flight cancellations at monopoly airports and more super-storms and megafires — the nitty-gritty of microeconomics remains far from the minds of most voters. Which is probably just as well for Donald Trump, given the lack of microeconomic progress, or even the consistent defense of efficient markets, under his leadership.