The Wall Street Journal on U.S. economic policies
As the election results became clear in 2016, financial markets rose amid a surge of economic optimism. That surge continued for two years as Donald Trump and Republicans pursued a pro-growth agenda of tax reform, deregulation and encouraging domestic energy production. But with Democrats now controlling the House and Mr. Trump already campaigning for re-election, Washington is again taking an anti-growth turn. Don’t be surprised if slower growth follows.
That’s the disappointing big picture if you step back from the daily fray and look at the direction of U.S. economic policy. Mr. Trump’s first two years were focused relentlessly on ending the economic malaise of the Obama years. Nearly every policy was seen through a growth prism.
But as he focuses on re-election, Mr. Trump is returning to the issues that marked the worst moments of his 2016 campaign. He is restrictionist on immigration, increasingly protectionist on trade, and more interventionist in regulating business. He favors price controls on drugs, a mandate for paid family leave, and his regulators are revving up what looks like it could become the largest federal antitrust campaign since the 1970s.
Meanwhile, House and Senate Democrats are advancing their own election agenda that includes higher taxes and new regulation on finance and industry. The only pro-growth measure that could pass would be Mr. Trump’s renegotiated NAFTA deal, but that is in greater jeopardy after last week’s tariffs on Mexico. Gridlock will probably prevail through 2020, but investors will have to start discounting the chance that Democrats could implement much of their agenda in 2021.
All of this is already hurting growth, and especially business investment. The Institute for Supply Management’s manufacturing index fell to 52.1% in May, its lowest since 2016. Surveys of CFOs show that investment plans for 2019 have slowed sharply amid the new policy uncertainty. A majority of business-earnings calls mention trade as a major concern. ...