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THE BOTTOM LINE

Wanted: Leadership values, higher path to US greatness

SOME 128 months of economic expansion that began in June 2009 ended abruptly last February. The United States entered a chilling recession with the first signs of a pandemic originating in China. The change in economic fortunes undercut a central plank in Donald Trump's re-election campaign.

In the span of five months, the economy's momentum has been depleted by job losses, with some 40 million people filing for unemployment insurance in the nine weeks to end-May. Congress passed a US$2 trillion economic relief package, with the likelihood of more to come, to help offset a GDP decline expected by the International Monetary Fund at 8 per cent this year.

Despite earlier signs of a V-shaped recovery, the forecast of a short recession but only gradual recovery has been reinforced by the mid-summer virus resurgence, notably in the sunbelt states and California. Analysts including Byron Wien and Joe Zidle of Blackstone have suggested that the US will not see a full revival to 2019 levels before 2022.

An elevated New York stock market, up 40 per cent since its March lows, can be attributed to investors' belief that central banks and governments around the world will continue to keep their economies afloat. Recent market highs owe much to a handful of tech stocks and are a far-from-reliable signal of economic fundamentals.

A re-election rallying cry based on the economy may reap few rewards. On another key issue, China, there is little to distinguish the Trump administration's critical position towards Beijing from that of Joe Biden and Democrats in Congress. If the economy falters, Trump supporters are not likely to identify his muscular approach toward China as a reason to stick with him come what may on Nov 3.

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The fallout from the 2017 tax cuts - at the centre of that year's "America first" programme - underscores how Mr Trump's economic strategy has been blown off-course. The budget deficit, according to the Congressional Budget Office, is heading towards US$3.7 trillion (17.9 per cent of GDP) by the end of the fiscal year on Sept 30. The level may be higher if additional Covid stimulus is approved. Public debt is likely to reach 100 per cent of GDP by fiscal year-end, close to the 1946 record of 106.1 per cent.

Mr Trump's tax reform, the largest tax code overhaul in three decades, permanently cut corporate tax to 21 per cent from 35 per cent. The package set benefits for individuals and families, designated as temporary, with a 2025 expiry date. This was a similar tactic to that used for tax cuts under President George W Bush which left his successor, Barack Obama, headed for a 2013 fiscal cliff.

America's unique inequality is an intrinsic part of its economic story, now intertwined with the dismal Covid experience. A broad-based survey in January by the Pew Research Center, before the pandemic and subsequent social protests, showed that most Americans believe the country suffers from too much inequality. A majority of those with this view believe the US economic system requires major change. Seven out of 10 adults said the system unfairly favours the wealthy and powerful.

PERIOD OF CALLOUS INDIFFERENCE

America's inequities and shortcomings are not Mr Trump's creation. But historians may view his White House tenure as a period of callous indifference toward obligations that are central to the presidential oath of office. Those responsibilities include presidential conduct toward foreign allies as well as strategic competitors and adversaries.

The post-war period has justifiably raised expectations of US leadership at home and abroad as the world's leading democracy and largest economy. Here, Mr Trump has fallen calamitously wide of the mark. Inequality and fragmentation at home finds its pendant in political imbalances abroad, which Mr Trump has done all too little to seek to amend. Especially egregious is his attitude toward longstanding partners - notably Germany, a stalwart transatlantic ally. Trump backers will buy into his nationalistic bent towards castigating immigrants, left-wingers and the Chinese as the cause of America's problems. His opponents will work to defeat him.

Instead of his ill-advised campaign for asserting greatness, Americans need credible, moral leadership able to unite society's divisions, strengthen economic fundamentals, and represent "America first" in a way that doesn't negate all the others. The public health crisis has made the US's enormous political problems abundantly clear. On the basis of his rhetoric and track record, Mr Trump has neither the capacity nor the desire to emerge as a wise and seasoned leader in a second term.

The country still faces considerable risks if Mr Biden is elected. A Democrat-led House and a Republican-led Senate in 2021 would virtually guarantee political gridlock, stymieing decisive action needed on multiple public policy fronts. Yet, Mr Biden can offer the potential, if not the promise, of a return to post-war American leadership values underpinning genuine and not synthetic American exceptionalism. The end of the Trump interregnum would allow the country to restart, on a higher plane and with greater international support, the search for that elusive quality: American greatness. OMFIF

  • The writer is a 2016 distinguished career fellow at Stanford University

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