Trump is the Most Principled President in Over a Century. And That's Bad for All of Us | Opinion

The late Rodney Dangerfield joked, "I came from a broken home. I broke it." It's increasingly looking like President Trump owns an economy that if not quite broken, is cracked. And he broke it. He's now scrambling to undo the damage done by his trade policy and keep the economy strong through the election. To find out if he's likely to pull it off, I asked three experts—Tim Slaper, who is co-interim director of the Indiana Business Research Center (IBRC) at Indiana University, and two professional large investors. They agree the economy will be okay through 2020. But the investors believe after that, "There's a bumpy road ahead."

There is general agreement that the economy is slowing down. On Wednesday, Bloomberg published an article titled, The World is Stumbling Toward Disaster. It quoted the International Monetary Fund, which again dropped its forecast for global growth, citing a "synchronized slowdown." Dr. Slaper and the other experts I asked don't see an economic "disaster" in 2020. They think it will slow down but not go into recession, continuing to grow at percentage point or two less than the last few years. Many economists argue that the President bears some of the blame. His tax and interest rates cuts provided a short-term boost to the global economy. But his tariffs, erratic foreign policy, and immigration policy are undoing much of that. One investor said, "The China thing is huge."

Huge, but not immediate. For the most part, tariffs, immigration, and an unsettling foreign policy are long term in nature. To the extent they effect the short term, it is indirectly by raising the general level of uncertainty. The IMF produces a quarterly metric called the "World Uncertainty Index." During the roughly twenty years before Mr. Trump's election, it averaged 113. Since his election it's averaged 189. This past summer it reached an all-time high. Of course, some of that is likely due to other factors like Brexit and Catalan secession. But business hates uncertainty and Mr. Trump's deal-making style of management produces plenty of that. Mr. Trump is aware that the markets don't like some of his policies and has retreated on trade. As one expert said, "He's trying to do everything he can to get elected. He'll settle with China and get nothing and he's writing checks to farmers." This reversal of policy is helping reassure financial markets, who as one of the experts said, "are giving him credit."

However, it would be a mistake to think that backing off on the China tariffs represents a new version of Trump, one committed to a more orthodox approach to participating in the global economy. The President's critics often accuse him of being unprincipled. In fact, Trump may well be the most principled president since Abraham Lincoln. The fact that many don't like Trump's five core principles—self-enrichment, protectionism, alt-xenophobia, isolationism and allegiance to family above all—doesn't mean he doesn't have them.

Ever the dealmaker, Trump will float wild ideas then tactically retreat when he meets resistance, as he did in agreeing not to hold the G-7 summit at his Doral property, or by calling for the unilateral and immediate withdrawal of troops, then backing down. In the case of the economy, one expert says, "Trump watches two numbers. The unemployment rate and the stock market. Walking the tariffs back is the right answer. He walks them back when he sees a change in the stock market." However, he invariably reverts to his core principles at the next opportunity. Mr. Trump genuinely believes that trade is a zero-sum game and that the U.S. doesn't need to be part of the global community. Only those old enough to remember Herbert Hoover have ever seen a worldview like it. Mr. Trump may walk away from his bad ideas until the election's over, but he will go back there.

Just because he may not have broken the global economy yet, doesn't mean he will stop trying. Sooner or later, he will succeed. Once the economic slide accelerates, there's not much Mr. Trump can do to stop it. As Dr. Slaper says, "In this low interest rate environment like we're seeing in Europe and Japan, there's not much lower he can go. Nor is there a lot of room for a stimulus package. I think our debt service is almost as large as the defense budget." An expert agrees. "He can still lower interest rates, that's feasible, but not much. Maybe he can spend more, even though that puts our kids in a deeper hole, but what would he spend it on? No president's gotten an infrastructure bill through in generations. You'd think it'd be easy—who doesn't like roads—but Obama couldn't do it. Hard to believe President Trump could." My final source said, "I can't believe the Dems will let him have a fiscal stimulus. Maybe he could get more tax cuts through—maybe for the poor people who missed out last time around. There's been some talk of cutting capital gains by executive order, but that seems to have died down. I'm not sure it's possible."

Dr. Slaper isn't particularly worried. The two investors I spoke to are. "There's something going on. The numbers don't add up. We have the largest tax cut in history and the lowest unemployment rate in fifty years, no inflation and the Fed can't raise rates without sending markets spinning. We've normalized low rates. It works until it doesn't work. Once you get into that negative rate environment, it's hard to get out of. Look at Japan. When that happens, you have no tools left to manage the economy."

Sam Hill is an author, consultant and Newsweek contributor.

The views expressed in this article are the author's own.​​​​​

Trump is the Most Principled President in Over a Century. And That's Bad for All of Us | Opinion | Opinion