The economy, stupid? Trump's first year

Has it been a year already?

"This American carnage stops right here and stops right now," vowed the new US President Donald Trump at his inauguration on January 20, 2017.

Like his campaign rhetoric, the speech was heavy on economic references. It spoke of trade imbalances and manufacturing revival, of jobs and taxes. Its most consistent theme was the promise of redistribution: "The forgotten men and women of our country will be forgotten no longer."

Read more: New American tax code sees Apple boost investment in US

Ultimately, the time to judge Trump's performance on the economy and other matters will be in 2020. Nonetheless, it is worth taking a look at how the US economy has performed so far under Trump's watch, particularly in the areas he made the biggest promises on.

Vital signs

"I would give him a grade of an 'A' on the economy and I think almost all Americans would," Stephen Moore, an economic policy analyst who advised Trump during his campaign and who worked on the recently passed tax reform plan, told DW.

Read more: Despite Trump boom, the US president is 'harming global economy'

Citing a US stock market boom, an unemployment rate of 4.1 percent, accelerating GDP growth and surging levels of business confidence, Moore says it's hard to point to anything that hasn't gone right so far for Trump on the economy.

It's true that many basic economic indicators look good for the US at the moment, certainly better than many economists predicted that they would if Trump were elected. Where there is debate is the extent to which Trump is responsible for the healthy vitals and for how long things can stay positive.

Robert Scott is a senior economist with the Washington-based Economic Policy Institute. He told DW that while some US economic indicators are positive, they are part of an eight-year trend that is threatened by Trump's presidency.

"The recovery has been under way since 2010," he said. "However, there are several indicators that are concerning. For one, the actual number of jobs created has been on a steady declining trend. Also wage growth is weak."

Pro-business, pro-worker, or both?

At the center of Trump's electoral campaign was a vow to improve the lot of ordinary working Americans and to redistribute the fruits of the nation's wealth. However, this is where many opposed to Trump's presidency see the starkest divergence from what was promised and what is actually happening.

"He has sold out on the people who elected him to office," says Scott. "What we have seen is a series of steps that have been taken that have shifted income from working people to those in the top one percent."

Scott says that since Trump came to power, the US Department of Labor has, with business owners' interests in mind, rolled back several regulations which were in place to protect workers such as rules on overtime pay protection, on the percentage of tips that can be taken home and on workplace health and safety.

Moore, who works with conservative think tank The Heritage Foundation, believes Trump's "pro-business" instincts are serving him well and a major part of the reason why US stock markets have boomed since the election.

"I think that investors and employers believe that Donald Trump is a pro-business president and that is reflected in the confidence that investors have in the economy going forward," he said. "He is singularly responsible for that."

Made in America

Another of Trump's promises was that he would restore jobs in American manufacturing and construction. On that score, the numbers are more positive than negative, with the US Bureau of Labor Statistics showing that over 400,000 jobs were created in construction and extraction since Trump came to office a year ago.

Scott acknowledges the increase but feels that the rise in the US trade deficit — up by around 10 percent since Trump came to office — will continue to put pressure on demand for US made goods.

Moore believes Trump should "be thumping his chest” for the rise in manufacturing jobs but he acknowledges that many more will need to be created if Trump is to be re-elected.

"The reason he won the election so surprisingly was that he won some of those industrial states of blue collar workers that abandoned the Democrats because they hadn't seen the jobs and the wage increases," he said. "If he is to be re-elected, he has to deliver for those states."

The most taxing question

The most tangible legislative achievement of Trump's first year, certainly in economic terms, is the major tax bill that recently passed through the US Congress. The bill, which paves the way for the biggest change in the US tax code since the 1980s, cut corporate income tax from 35 percent to 21 percent and also included several other corporate-friendly measures.

Read more: Africa divided over Donald Trump's first year in office

Moore, who advised the White House on the bill, firmly believes it will boost the economy.

"This will lead to more investment in the US. Businesses will expand their operations, they will build more factories, purchase more trucks and machinery and in doing that they will be able to pay workers more," he said: "Workers get paid more when they are more productive and they are more productive when they have more capital equipment."

Scott sees the tax bill as being in line with the way the Trump presidency has so far favored the "top one percent."

First of all, he believes the major increase in the value of US stocks happened in anticipation of the "massive" tax cut that favors the rich and corporate sectors. Secondly, he thinks the cut will generate an enormous increase in the US budget deficit over the next 10 years, which, in his view, will have negative consequences for the trade deficit.

"I am concerned that Trump has planted seeds that are going to explode," he said. "He has created and put in place a new tax policy that will increase the deficit, enormously. That will lead to an increase in borrowing; it will lead potentially to price bubbles in the economy."

A little less conversation, a little more action on trade

In terms of US trade, another area where Trump has made major declarations, not much has so far happened.

"It has been all talk and almost no action," says Scott. Highlighting the fact that the Trump administration was due to publish reports on threats to the American steel and aluminum industries back in July but still hasn't done so, he said: "there has been no effort to promote policies to deal with problems in these industries despite layoffs." 

Moore believes it is too early to make judgments on how Trump has performed on trade. "This will be the year when we are able to answer that question," he said. "But I have always believed in some ways that his bark is worse than his bite when it comes to trade."

The economy, stupid

So, how to assess his performance so far?

"It is easy to write too much into what happened in one year," says Moore. "He will be judged in 2019 and 2020 when he is up for re-election by how the economy is doing then, not how it is now."

For Scott, the longer Trump's presidency goes on, the more chance there is of his economic policies having a harmful effect. Yet he says there is no guarantee of enough going wrong before 2020 to stop him winning a second term.

"Trump could get lucky," he says. "But I think what will drive the election is the growing dissatisfaction with the policies that Trump has already put in place."